South Africa | Tax Statuses

South Africa | Tax Statuses

The Tax Status field on the Tax Profile screen how the employee’s tax will be calculated. Based on the selection made from the dropdown list, further required information will be prompted. This article contains the definition of each tax status.

      Navigate > Employee > Basic Information > Tax Profile > Tax > Tax status

      

      

Tax Status explanations

Tax Status

Explanation

Common Law Independent Contractor


On this tax status, an employee will be subject to SDL and will be taxed according to the progressive tax tables.

When the tax status is set to “Independent Contractor”, the UIF status will automatically default to “Independent Contractor” and no UIF contributions will be calculated.

An employee's basic salary will be converted to tax code 3616.

 Directive


A tax directive (IRP3) is issued by SARS to instruct the employer/fund how to deduct employee’s tax from these payments. This can be updated annually. The history can be viewed on the Directive report.

Director (Private Company)


The employee is taxed as a normal employee on standard employment according to the progressive tax tables.

Prior March 2022, when this tax status is selected, the employee will reflect as a director on the COIDA reports. After March 2022, the custom field “Director for COIDA” must be selected.

Foreign Employment


The Foreign Employment tax status should be used for RSA resident employees who earn income in a foreign country.

Normal progressive tax tables will be applied but 50 will be added to all Tax codes, e.g., 3651 (Basic Salary), 3655 (Annual Bonus), etc.

Independent Contractor


An Independent Contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. They are taxed using the same as standard employment using the progressive tax tables.
When the tax status is set to “Independent Contractor”, the UIF status will automatically default to “Independent Contractor” and no UIF contributions will be calculated.

Basic Salary will be converted to Tax code 3616.

Independent Contractor (Directive)

A tax directive (IRP3) is issued by SARS to instruct the employer/fund how to deduct employee’s tax from these payments. This can be updated annually. The history can be viewed on the Directive report.

Independent Contractor (No Tax)

An Independent Contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement.

When the tax status is set to “Independent Contractor (No Tax)”, the UIF status will automatically default to “Independent Contractor” and the SDL status to “Learner/Excluded from SDL” and no Tax, UIF or SDL amounts will be calculated.

Basic Salary will be converted to Tax code 3616.

Labour Broker


Remuneration paid to a Labour Broker without a valid exemption certificate (IRP30) is subject to employee’s tax.

Basic Salary will be converted to Tax Code 3619 if the employee has a valid exemption certificate. If not, the Tax code will be 3617 and the employee will be taxed as per the progressive tax tables.

Non-Resident Tax Treaty Exemption


This tax status is not based on legislative criteria and exists solely to overcome the SARS e@syFile™ verification difficulties associated with employees who are exempted from Tax in terms of the tax treaty between South Africa and Mozambique which exempts Mozambiquan mineworkers from being taxed in South Africa.

This tax status should be used at the discretion of the employer; PaySpace will not assume any compliance risk associated with applying for this tax status.

With this tax status, the IRP5 certificate as well as the submission file will convert tax code 3601 to non-taxable tax code 3602.

To exempt the employee from SDL or UIF the user must select the desired option on the Exemptions and Other tab on the Basic Profile screen. When this tax status is selected, PAYE will be exempt. UIF and SDL will still calculate.

Non-Standard Employment


Employee’s tax is deductible at the rate of 25% in respect of employees (including scholars and students), who are not in standard employment.

These employees include:

  1. Workers not in standard employment employed daily and who are physically paid daily.
  2. Casual commissions paid, such as “spotter’s fees”.
  3. Casual payments to casual workers for irregular services rendered or occasional services.
  4. Fees paid to part-time lecturers.
  5. Honoraria paid to office bearers of organisations, clubs, etc.

 

Non-Resident NED (Non-Standard)


Employee’s tax is deductible at the rate of 25%. Income on tax code 3601 will be converted to tax code 3621.

The UIF Exemption Reason will automatically default to “Independent Contractor”, the SDL Exemption Reason will default to “Learner/Excluded from SDL” and the “Does Not Qualify for ETI” checkbox will be enabled. Therefore, no UIF, SDL, COIDA, or ETI will be calculated on the payslip.

Non-Resident NED (PAYE)


Normal progressive tax tables will be applied. Income on tax code 3601 will be converted to tax code 3621.

The UIF Exemption Reason will automatically default to “Independent Contractor”, the SDL Exemption Reason will default to “Learner/Excluded from SDL” and the “Does Not Qualify for ETI” checkbox will be enabled. Therefore, no UIF, SDL, COIDA, or ETI will be calculated on the payslip.

Non-Resident NED (Tax Directive)


Taxed according to the directive information captured by the user (Percentage/Amount).

Income on tax code 3601 will be converted to tax code 3621.

The UIF Exemption Reason will automatically default to “Independent Contractor”, the SDL Exemption Reason will default to “Learner/Excluded from SDL” and the “Does Not Qualify for ETI” checkbox will be enabled. Therefore, no UIF, SDL, COIDA, or ETI will be calculated on the payslip.

This can be updated annually. The history can be viewed in the Directive report.

Personal Service Company


The system calculation will default to 28% (financial year ending 1 April 2022 to 30 March 2023). If the PSP should be taxed at 27% (financial year ending 31 March 2023 and after), enable the checkbox on the Tax Profile screen.

Navigate > Employee > Basic Information > Tax Profile > Statutory Fields

Personal Service Trust

 Taxed at 45%.

Resident NED (No PAYE)


Income on tax code 3601 will be converted to tax code 3620.

The UIF Exemption Reason will automatically default to “Independent Contractor”, the SDL Exemption Reason will default to “Learner/Excluded from SDL” and the “Does Not Qualify for ETI” tick box will be activated. Therefore, no UIF, SDL, COIDA, or ETI will be calculated on the payslip.

Standard Employment (Normal)

Normal progressive tax tables will be applied.

Temporary Employment

Taxed according to the progressive tax tables as and when there is a payslip. This is typically used for seasonal workers.