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In the tax court of Free State held In Bloemfontein

27 January 2005   (0 Comments)
Posted by: TaxFind™
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In the tax court of Free State held In Bloemfontein

In the appeal between appellant and the Commissioner for the South African Revenue Service.Heard on 11 October 2004.

Mini Summary

The appellant, a micro-lender, used independent contractors to market its money-lending products.In terms of their marketing service agreements the "marketing agents" were, inter alia, confined to providing services within specific provinces and areas; they could only market the financial products of the appellant and they were constrained not to disclose confidential information obtained about the appellant.They were remunerated at the rate of R250 per loan product marketed and approved.There were no prescribed minimum and maximum targets that they were obliged to meet.Their remuneration therefore fluctuated in accordance with their own efforts.On this basis two of the agents had received regular monthly payments.The payments were recorded under the same codes as salaried staff on the appellant's computer programme.As a result of these factors, the Commissioner for the South African Revenue Services, the respondent, had assessed these marketing agents as "employees" and had deducted employees' tax from the "commission" which the appellant had paid to them.An appeal against this assessment had failed.In this appeal to the tax court, the issue was whether the marketing agents were independent contractors, whose fees did not attract employees' tax, or whether they were employees who received "remuneration" in terms of the definition provided in the fourth schedule of the Income Tax Act 58 of 1962.

Held that "remuneration" is defined as "any amount of income which is paid or is payable to any person . . .. of any salary, wages, bonus, commission . . . whether in cash or in kind size and whether or not in respect of services rendered . . . provided that he is subject to the control and supervision of any other person as to the manner in which his duties are performed . . . or if the amounts paid . . . consist . . . of earnings of any description which are paid at regular daily, weekly, or monthly intervals.

Held that the relationship between the parties had to be gathered from the terms of their written contract.The clauses, which the respondent used to justify its contention, were placed in the contract for the preservation of the appellant in a highly competitive market.They were not so restrictive that the agents were subject to the "control and supervision" of the appellant.The fact that two agents received payments regularly on a monthly basis did not have an "adverse impact on the entrepreneurial autonomy of the marketing agents as independent contractors".Having considered the "pros and cons" of the appeal the court found that the agents were independent contractors.The appeal was upheld. There was no order as to costs on the grounds that the Commissioner's case had been very plausible. Any financial loss suffered by the appellant was "squarely attributable to the dubious dealing" it had with its marketing agents.

To view full decision click here


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