Allowable deductions for a commission earner
15 October 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: My client earns
a salary of R300 000 of which the commission portion is R278 000 (more than 50%
of his salary is commission based). He has taxable allowances (petrol, car,
phone) of R120 000 which was used to produce his income. Hence his actual
income needs to be reduced to R280 000 as he used the allowances to produce his
type of directive is requested and by whom is the directive filed? Is it done
for a fixed percentage or value?
A: We are not
certain what exactly the guidance is required on. You refer to ‘income
tax’ and to ‘the directive’ and also to the ‘income needs to be reduced’.
We will provide guidance in respect of both employee’s tax and normal
It is possible for the person in
this instance to apply for a directive from SARS – refer to paragraph 11(a) of
the Fourth Schedule to the Income Tax Act. It specifically allows for
SARS to issue "a directive to an employer authorising that employer to refrain
from deducting or withholding any amount under paragraph 2 by way of employees'
tax from any remuneration due to any employee of that employer; or to deduct or
withhold by way of employees' tax from any remuneration in terms of paragraph
2, a specified amount or an amount to be determined in accordance with a
specified rate or scale, … in the case of remuneration constituting
In applying for the directive the
employee would indicate if a fixed percentage is required (normal where
commission is earned).
Because the remuneration consists
more than 50 per cent commission, the limitations of section 23(m) do not
apply. If a travel allowance is included in the remuneration, the
deduction can be made in terms of section 8(1). See also the SARS
Interpretation notes 14 and 28.
Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.