An independent contractor is an individual or entity who provides services to a client or business under the terms of a contract or agreement. Independent contractors typically operate independently, have control over how the work is performed, and are not considered employees of the client or business. They may work on a project basis, set their own hours, use their own tools and equipment, and have the freedom to work for multiple clients.

In South Africa, the classification of an individual as an independent contractor is based on various factors, including the nature of the working relationship, the level of control exerted by the client or business, the provision of services on a non-exclusive basis, and the financial independence of the contractor. It is important to correctly classify workers as employees or independent contractors to ensure compliance with labor laws, tax regulations, and other legal requirements.

No, an independent contractor’s income is not subject to employee’s tax (PAYE) in South Africa. Independent contractors are responsible for managing their own tax affairs, including registering for and paying income tax directly to the South African Revenue Service (SARS). Independent contractors are not considered employees of the clients or businesses they provide services to, and as such, they are not subject to PAYE deductions on their income. It is important for independent contractors to fulfill their tax obligations by registering for income tax, submitting tax returns, and paying any tax due to SARS.
The Fourth Schedule prescribes that the independent contractor’s income will be deemed to be remuneration and will therefore be subject to Employees’ Tax, if —
• The services are required to be performed mainly at the premises of the person by whom the remuneration is paid/payable or of the person to whom such services were or are to be rendered;
• The person who renders or will render the service is subject to the control and supervision of any other person as to the manner in which his/her duties are performed or to be performed or as to his/her hours of work
• The employer, being a party to the employment contract, is in the best position to determine whether or not the employee is an independent contractor. SARS has therefore provided certain guidelines in order to assist the employer with this responsibility.
These guidelines are available in Interpretation Note 17 and can be obtained on the SARS website www.sars.gov.za.
The employees’ tax deducted for an independent contractor whether calculated according to the deduction tables or a tax directive must be reflected as PAYE. Reflect under code 3616 on the IRP5/IT3(a) certificate (PAYE-GEN-01-G19 PAR 13.2)