Freelancer? Commission Earner? Here’s How SARS Sees (and Taxes) You
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If you earn income outside of traditional employment, such as through freelance work or commission-based sales, the South African Revenue Service (SARS) sees you as self-employed. This tax status brings specific responsibilities and opportunities under the law.
This guide explains how your tax obligations work, including references to the relevant legislation.
Tax Status and Net Profit
Under Section 1 of the Income Tax Act 58 of 1962, individuals conducting a trade (such as a profession or vocation) are liable to pay tax on their net profit. This means you are taxed on your income after allowable business expenses have been deducted.
As a self-employed individual, you are responsible for calculating, reporting, and paying your own taxes. There is no employer to handle this on your behalf.
Provisional Tax
According to Paragraph 1 of the Fourth Schedule to the Income Tax Act, if you earn income that does not have Pay-As-You-Earn (PAYE) withheld, you are considered a provisional taxpayer.
Your obligations include:
Submitting two provisional tax returns annually, usually in August and February.
Making a possible third top-up payment by the end of September.
Estimating your taxable income for each period and paying tax in advance.
SARS may penalise taxpayers for underestimating their income if the estimates are significantly below the final actual income. This is outlined in Paragraph 19(3) of the Fourth Schedule.
Deductible Business Expenses
Under Section 11(a) of the Income Tax Act, you are allowed to deduct expenses that are incurred in the production of income. These expenses must be both wholly and exclusively for business purposes.
Examples include:
Home office expenses, provided the space is used regularly and solely for work.
Travel costs, which a detailed logbook must support.
Office supplies, phone and internet bills, software, and professional fees.
Advertising, branding, and marketing expenses.
If you are a commission earner, you may deduct expenses related to client entertainment and business-appropriate clothing.
All deductions must be backed by proper documentation, such as invoices and receipts. SARS will not allow estimates or assumptions.
Independent Contractor or Employee?
Not everyone who is called a “contractor” is legally treated as one. Under Paragraph 2(1)(a) of the Fourth Schedule, if you provide services mainly at a client’s premises and are subject to control or supervision regarding how or when you work, you may be classified as an employee for tax purposes. In that case, PAYE may be required.
However, if you employ three or more full-time, unrelated employees throughout the year of assessment, you are automatically classified as an independent contractor. This is one of the few statutory exemptions in place. To learn more about this
Special note for commission earners
Pay As You Earn
If more than 50 percent of your total income consists of variable remuneration such as commissions, you may be exempt from PAYE, even if you receive an IRP5 from a client. This exemption is outlined in SARS Interpretation Note 17, Employees Tax: Independent Contractors.
VAT Registration
Under Section 23 of the Value-Added Tax Act 89 of 1991, you must register for VAT if your total taxable turnover exceeds R1 million in any consecutive 12-month period.
You may also choose to register voluntarily if your annual turnover exceeds R50,000. VAT returns are generally submitted every two months, although some vendors may have monthly periods.
Risks and Recordkeeping
SARS places great importance on the substance of the relationship over the form. Just because a contract labels you as a contractor does not mean you will be taxed that way.
Employers who misclassify workers to avoid paying Pay-As-You-Earn (PAYE) taxes may be held responsible for back taxes, interest, and penalties. SARS can also reassess your provisional tax filings and apply penalties if it believes your estimates were too low.
It is essential to keep detailed records of income and expenses, maintain formal contracts, and ensure that your operations reflect a true independent business.
Practical Compliance Checklist for Independent Contractors
Provisional Tax – Register and file returns biannually.
Income Estimation – Keep records to support estimated income.
Deductions – Document all allowable business expenses.
PAYE Risk – Use statutory tests and ensure independence.
VAT – Register if turnover exceeds R1 million.
Documentation – Maintain contracts, logs, receipts, and bank records.
Conclusion
Managing taxes as an independent contractor or commission earner in South Africa may feel overwhelming at first. However, with a clear understanding of your responsibilities and rights under the Income Tax Act and VAT Act, you can take complete control of your financial obligations and avoid unnecessary penalties.
The key is to stay organised, track every cent of income and expense, and ensure your business operations reflect your independent status. By doing so, you can maximise your allowable deductions and minimise your risk of misclassification or non-compliance.
Always remember that tax laws can be nuanced. If your situation is complex or unclear, consulting a registered tax practitioner is not just a good idea, it is a smart investment in your peace of mind and long-term success.
With the right tools and knowledge, handling your own taxes can become less of a burden and more of a business advantage.
Join CIBA’s Tax Happy Hour webinar on 25 June 2025 when we discuss Contractors in Chaos? Help Them Master Tax.
What Will Set You Apart
By attending this webinar, you'll walk away knowing:
✅ How to tell if your client is a true contractor—or a SARS-deemed employee
✅ What expenses are claimable, and how to back them with audit-ready records
✅ How to help clients manage provisional tax, cash flow, and estimates
✅ How to choose the right income structure—sole prop vs company—for tax savings
✅ What triggers SARS audits—and how to protect your clients (and yourself)
Join CIBA and we’ll show you how to turn tax complexity into billable confidence.
