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Avoid a 200% penalty. Make sure you know how to tax labour brokers correctly

by , 11 December 2013
Do you use labour brokers to supply you with temporary staff when one of your staff members is on leave? Be careful, if you don't tax labour brokers correctly, it could cost you an extra 200% in penalties to SARS.

It's not as easy as you think. Let me show you exactly how to tax labour brokers correctly.


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How to tax a labour broker correctly
First, you need to see if the labour broker has a valid tax exemption certificate.
If he does, don't deduct employee's tax from money owing to him. Pay the amount on the invoice.
If he doesn't, you must deduct employee's tax from the money you pay him.
Let's have a look at how much you must deduct from the labour broker.

How much tax do you deduct from a labour broker?
You must deduct employees' tax according to the employees' tax deduction tables.
For example, the labour broker charges you R50 000 for the month of September. Using the individual's tax tables you'll deduct R9 000 from the amount you owe the labour broker and you'll pay him R41 000.

But now you need to record it and allocate the correct source codes to it. Not sure where to start? Turn to chapter C14: Contractor in your Practical Tax Loose Leaf to see what you have to do.
Until next time
Natalie Cousens
Managing Editor: Practical Tax Loose Leaf
P.S. If you have a question on how to tax labour brokers, you can post your question on the Accounting and Tax Club at http://www.accountingandtaxclub.fspbusiness.co.za/

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