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How do independent contractors get taxed?



I will be taking a new job that requires me to be a contractor. There are mixed opinions on how contractors get taxed. The consulting company assures me this is a flat rate of 25%, but on reading SAICA's website I found this little nugget: " If the independent contractor works more than 22 hours a week, he/she must be taxed in terms of the income tax tables".
I will definitely be working more than 22 hours a week, can you tell me things will work, please?

The question of tax relates to how you are perceived to be working for the "employer" to whom you will be contracting out to. From the information provided you would fit the statutory requirements of an "Employee" even though on the contract you are an independent contractor. When this happens and, as you have already said you will be working longer than 22 hours, the company needs to apply the normal tax tables and deduct whatever is owing to SARS. They would use the independent contractor code however and you will still be able to deduct the business expenses used in earning this income.

you will have to have PAYE deducted. At that rate you will be taxed at the 40% bracket - you can make use of our SARS income tax calculator to see what the pre-expenses deductions will be. I would advise asking the company to deduct more than 25% otherwise you may have to pay it at the end of the tax year.

Business expenses would be the costs involved in doing your work, so this would be travel, equipment that you may use, business calls, cellphone. Essentially any expense that you incur in relation to earning that income would be allowed as a deduction against the income earned.



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