Employee Tax – Independent Contractor

Reference to the Act                    

Income earned by an independent contractor is specifically excluded from the definition of remuneration in Paragraph 1 of the 4th Schedule.


In distinguishing between an employee and an independent contractor/trader one must commence with an analysis of the employment contract. The object of the contract (or the parties’ rights and obligations under the contract) must be established. 

Deemed independent contractor

The object of the contract is not a mere indicator, but determines the legal nature of the contract. The object to be established is the pre-eminent object, for example, if the object is the surrender of productive capacity (whether capacity to provide a service or to produce things), then the contract is for employment of an employee. The essence of an employee’s contract (contract of service) is the placing of one person’s services (labour) at the disposal of another, enabling the acquisition of that service itself and not simply the fruits of that productive capacity.

If the object is the acquisition of the result of deployed productive capacity (of a produced thing or of a provided service), then the contract is for the employment of an independent contractor. The essence of an independent contractor’s contract (contract for services or work) is that the independent contractor only commits himself/herself to deliver the product or end result of that capacity.

The person will be deemed to be an independent contractor if he/she throughout the year of assessment employs three or more employees (other than any employee who is a connected person in relation to such person) who are on a full-time basis engage in the business of persons rendering any such service and providing that neither of the above two proviso’s under exceptions are applicable.



The 4th 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.