If you hire an independent contractor, you MUST NOT deduct employees' taxes from the pay you give him. You only deduct employees' taxes from the pay you give to employees.
The Practical Tax Loose Leaf Service explains that SARS applies a certain test to your workers if it has any doubts about your policies.
If you understand how SARS tests your employment relationships, you'll never make a mistake in your treatment of independent contractors.
Let's take a look at the test.
Use this test to see if your worker is an independent contractor so you can tax him pay and tax them correctly
SARS uses a statutory test to see if the worker is independent. The three questions SARS asks in the statutory test are:
If the answer is NO, then the worker is independent, and you don't tax his pay.
If the answer is YES, the worker ISN'T an independent contractor. BUT he's not automatically an employee!
If he employs three or more full-time staff (and they aren't his relatives), then he's said to be conducting an independent trade.
Remember, if you understand how SARS tests your employment relationships, you'll avoid mistakes in your treatment of independent contractors. So use this test to decide how to pay and tax independent contractors correctly.
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