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Payment to a non-employee

Posted 14 July 2014 under Tax Questions


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Please can you explain what I should do with the following scenario?
I need to pay commission to a person (non-employee) for a business lead. What deductions do I need to make and what documentation should I issue them with?

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TaxTimTaxTim says:
14 July 2014 at 17:21

Are you registered to pay PAYE> do you often pay for leads?


Cameron says:
15 July 2014 at 8:02

Yes, I am registered for PAYE. I havent paid anything as yet but am anticipating that I will be.
We have an agreement with a company and their Sales team often bring in leads (similar industry but different work). If any of the work comes off, we want to pay commission to the sales team.


TaxTimTaxTim says:
15 July 2014 at 9:33

You would need to issue them with an IRP5/IT3a which you can either generate on SARS EasyFile or you can prepare one manually, we suggest using EasyFile as you would do for any normal employee. However if it is to a company and not a particular person then you do not need to take off any Tax, but just pay them the amount and the company will sort out the individual's tax situation.


Cameron says:
15 July 2014 at 9:44

Thank you. I am registered on Easyfile. Do I need to do any tax deduction? Should I deduct a standard 25%? What is the norm?

Would they be classified as an Independent Contractor (03)?.


It will be to individuals as opposed to a company.


TaxTimTaxTim says:
15 July 2014 at 9:50

Yes you would classify them as Independent Contractors if it is just a once off and they work for other companies, however if they work for one company only then you would need to deduct 25% unless they have a tax directive indicating otherwise.


Cameron says:
15 July 2014 at 9:53

Thank you for your assistance.


TaxTimTaxTim says:
15 July 2014 at 10:45

Only a pleasure!


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