Written by Ruwaida Lottering, Administrator: AP & Audit and Ben Lekgwathi, Auditor
Who is an independent contractor?
In South Africa, an independent contractor is a self-employed individual or entity that provides services to clients or businesses under terms defined in a contract, rather than as an employee. Independent contractors operate independently and are not subject to the same labour laws as employees.
SARS uses two main tests to identify your tax status:
- Supervision or Control Test – If your client dictates how, when, or where you work, SARS may consider you an employee.
- The 80/20 Rule – If one customer accounts for 80% or more of your total income, and you do not employ more than three full-time employees (excluding close relatives), SARS may consider you an employee for tax purposes.
If neither of these circumstances apply to you, you are most likely classified as an independent contractor and you are responsible for meeting specific obligations with the South African Revenue Services (SARS):
- Income Tax of Independent Contractors
An independent contractor does not receive an IRP5 certificate. Independent contractors must file an annual tax return, ITR12, and must declare all income and authorized expenses so that the taxable income can be calculated accordingly. You must also retain complete financial records and supporting documentation for at least five years in case SARS requests an audit.
Tax Rates (2025)
Progressive tax rates apply (same as employees):
| Taxable Income (R) | Rate of Tax (R) |
| 0 to 237 100 | 18% of taxable income |
| 237 101 to 370 500 | 42 678 + 26% of taxable income above 237 100 |
| 370 501 to 512 800 | 77 362 + 31% of taxable income above 370 500 |
| 512 801 to 673 000 | 121 475 + 36% of taxable income above 512 800 |
| 673 001 to 857 900 | 179 147 + 39% of taxable income above 673 000 |
| 857 901 to 1 817 000 | 251 258 + 41% of taxable income above 857 900 |
| 1 817 001 and above | 644 489 + 45% of taxable income above 1 817 000 |
2. Provisional tax for Independent Contractors
Because their income is not subject to PAYE (Pay As You Earn), the majority of independent contractors qualify as provisional taxpayers. This implies that you must pay SARS directly and in advance, using provisional tax payments.
These payments are made twice a year, with an optional third instalment:
– 1st Payment: 31 August
– 2nd Payment: End of February
– 3rd Payment (optional top-up): 30 September
You use IRP6 forms to submit these payments. The purpose is to spread your tax liability throughout the year and avoid interest and penalties.
3. Pay-As-You-Earn (PAYE)
As an independent contractor there is no PAYE deducted from your income.
4. Deductible Business Expenses
One perk of working as an independent contractor is the ability to deduct eligible business expenses from your income. This can significantly minimize your tax liability.
Examples of deductible expenses include:
- Office & Equipment: Rent, internet, computers, software.
- Travel & Vehicle: Business-related fuel, maintenance (logbook required).
- Professional Fees: Accountants, lawyers, subscriptions.
- Marketing & Advertising: Website, ads, business cards.
These deductions must be supported by adequate paperwork, such as receipts, invoices, and logs.
5. VAT Considerations
If your turnover exceeds R1 million in any 12-month period, you are legally required to register for VAT. You can do this through the SARS filing system.
Once registered, you must issue valid tax invoices and submit VAT201 returns, typically every two months. For some contractors, VAT registration can add credibility and allow them to recover input VAT on expense
6. How to Register with SARS
- Online (eFiling): www.sarsefiling.co.za
- SARS Branch.
