Why PAYE when i pay provisional tax?

[saflyfish]

Hi all

I am a sole prop of my own small IT company.I have been providing my services to a company since 1 jan 2014.
I have no contract of any sort with this company & no full/part time employment there also.I invoice them directly on my company invoice.I am a provisional taxpayer and am responsible for my personal tax.My work there is 80% of my monthly income.

I have now been told by the accountant of the firm that they are now charging me 25% of my monthly fee backdated to March 2014 which is now 5 mnths.They say this is PAYE!

Surely if i am responsible for my own tax,and not an employee,PAYE is NOT applicable to me in any way?

Any advice here as to what they are saying?

 

[blunt]

As far as I recall this is a requirement for companies dealing with freelancers, a flat 25% deduction - you have to go and talk to SARS about getting some of that money back.

 

[rrh]

Provisional tax was originally paid twice a year, i.e. SARS had to wait for their money.

Then SARS decided they didn't like waiting, especially given that those on provisional tax were all professionals ...

Everybody now pays PAYE, with 25% being the provisional [monthly] amount.

When you submit your return you deduct the amount already paid.

 

[krono9]

You are trying to be an independent contractor, but because as you say 80% of your income is derived from one source, you are a deemed employee for SARS. Therefore, they deduct PAYE at the prescribed rate. It's not your choice. But honestly back dating it is maybe a bit harsh in one month... I would probably agree to do it correctly going forward....


http://www.pastelpayroll.co.za/Downloads/2013/Budget-Speech/Tax_Guide_Digimag/ebook/content/Tax_Guide_PKF2_Fin2013.pdf


Page 8 says it all if you want some backing....

 

[saflyfish]

Provisional tax was originally paid twice a year, i.e. SARS had to wait for their money.

Then SARS decided they didn't like waiting, especially given that those on provisional tax were all professionals ...

Everybody now pays PAYE, with 25% being the provisional [monthly] amount.

When you submit your return you deduct the amount already paid.

So I would get that money back?

 

[saflyfish]

You are trying to be an independent contractor, but because as you say 80% of your income is derived from one source, you are a deemed employee for SARS. Therefore, they deduct PAYE at the prescribed rate. It's not your choice. But honestly back dating it is maybe a bit harsh in one month... I would probably agree to do it correctly going forward....


http://www.pastelpayroll.co.za/Downloads/2013/Budget-Speech/Tax_Guide_Digimag/ebook/content/Tax_Guide_PKF2_Fin2013.pdf


Page 8 says it all if you want some backing....

Hi krono,I have read that but it doesn't make sense...sorry,my bad...are you saying they should pay the 25% and I should just pay the 25% from now onwards?

 

[MKFrost]

Hi krono,I have read that but it doesn't make sense...sorry,my bad...are you saying they should pay the 25% and I should just pay the 25% from now onwards?

You just pay the difference. So you still do your provisional tax as normal but you deduct what they have taken as PAYE from the amount you have to pay as per your provisional tax as this has already been paid over to SARS by them.

So for example, if you calculate your tax liability for your provisional tax and it comes to say 36% then you only pay the additional 11%, the other 25% has already been deducted and paid over for you.

 

[saflyfish]

You just pay the difference. So you still do your provisional tax as normal but you deduct what they have taken as PAYE from the amount you have to pay as per your provisional tax as this has already been paid over to SARS by them.

So for example, if you calculate your tax liability for your provisional tax and it comes to say 36% then you only pay the additional 11%, the other 25% has already been deducted and paid over for you.

Yes thanks I now understand

I really appreciate everyone's input

 

[dd1313]

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