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Have you taxed your labour broker correctly?

by , 17 September 2013
If your company deals with labour brokers, it's crucial you tax them correctly. So save your company harsh SARS penalties by empowering yourself with the know-how when it comes to dealing with labour brokers.

According to the Practical Tax Loose Leaf Service, a labour broker is any natural person, who conducts or carries on any business, where he:

  • Provides you with people (other than any person who qualifies as a labour broker under this definition);
  • Renders a service or performs work for you;
  • Gets other people for you; and
  • Pays such people.

As the person who requires a temporary worker (not an employee) to perform a specific task, you're referred to as the client or principal.

Who is the worker?

A worker performs the services you require. He may be available to the labour broker for placement with you on a full-time basis, or be recruited by the labour broker to satisfy your particular needs.

The labour broker either supplies his own employees to perform work for you or he hires workers for you.

But this arrangement carries tax consequences for you.

This is how you must tax a labour broker

Unless the labour broker has a certified copy of an exemption certificate (IRP30), which he must keep in case SARS conducts an inspection, you must deduct employees' tax from a labour broker's pay

The exemption certificate is only valid from the date of issue until the end of that tax year. The labour broker must apply each year for a new exemption certificate.

If the labour broker fails to keep a copy of the exemption certificate, SARS could assess him for the employees' tax value, as well as interest and penalties.

How much employees' tax must you deduct?

An individual who's identified as a labour broker is subject to employees' tax according to the rates applicable for individuals.

Well there you have it. Knowing how to tax a labour broker correctly will help ensure you avoid the 200% penalty by SARS.

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