When must PAYE must be deducted from the fee paid to a sole trader for services rendered?
26 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
one client, is sole proprietor she has a quite a big client base where he
invoices them for drafting speeches and writing media reports, etc.
His one client
insists on deducting PAYE from her invoice every month, saying that he is an
independent contractor to them therefore they are obliged to deduct PAYE.
I disagree and
have told them that he is not a personal service provider and 80% of his income
is not derived from them which is the case.
insisting since he is a sole proprietor and not a company/cc that they must
continue to do this.
Please can you
clear this up by what the tax law says about this?
obligation on an employer to withhold PAYE is from remuneration paid to an
employee. An employee by definition in the Fourth Schedule includes a personal
service provider. Remuneration is defined to include all forms of salary and
service payments (para (c) gross income) to persons who do not carry on an
independent trade and for the latter the person will be deemed not to carry on
an independent trade if he is subject to supervision and control and renders
the service mainly on the employer’s premises. He will be deemed to be
independent if he employs 3 or more persons in such business rendering such
The test is
applied as follows:
If the person
is a trust, company or CC then it must be determined if the entity is a
personal service provider as defined in para 1 Fourth Schedule. If it is PAYE
must be withheld.
If the person
is a sole proprietor, the remuneration test applies. Then it must be determined
if the person is in labour law employment. If not it must be determined if the
independent person is deemed dependent by rendering services mainly on premises
and under supervision and control of the employer.
If this test
applies then PAYE must be withheld, if not no PAYE must be withheld.
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