Many people now work from home in a freelance capacity. Picture: 123RF/KASPARS GRINVALDS
Many people now work from home in a freelance capacity. Picture: 123RF/KASPARS GRINVALDS

Q: During the past SA tax year, I was permanently employed by my company for one month (March 2019). I then started freelancing from April 2019. My previous employer continued to use my services in a freelance capacity and I’ve received payment from them every month from April 2019 to February 2020 with the 25% freelance tax being deducted each month. The total freelance payment over those 11 months amounts to R220,000 before the 25% tax. This, of course, excludes the one month I was permanently employed. My questions are:

  1. Do I need to register with the SA Revenue Service (Sars) now that I’m a freelancer, and submit two tax returns? 
  2. How do I go about submitting my tax return for the 2020 tax year? 
  3. Do the same tax season dates apply as when I was permanently employed?
  4. Would any money be due to me based on the 25% tax I have been paying each month? — Meagan via e-mail.

A: Daniel Baines, tax consultant at Mazars and author of How to Get a Sars Refund, replies:

  1. No, as your previous employer is withholding tax they will have to issue an IRP5 (the document that details income from a company) for your freelance income. You will probably have two IRP5s from that company when you submit your annual tax return. So there is only one tax return you will file but there will probably be two IRP5s that will form part of that tax return. In all likelihood your previous employer is now treating you as an independent contractor and your income from them for your freelancing will probably be put under code 3616, which is for independent contractor income. Please note that the law surrounding whether someone qualifies as an independent contractor is complicated and we cannot give you an answer whether you are an independent contractor for the purposes of tax. We have also presumed that you are not providing the services to your previous employer via a company or trust, as this would dramatically change your tax situation.
  2. You will submit as normal via exiling when the tax season opens in July 2020.
  3.  Yes, all individuals have the same tax year, from March 1 to February 28.
  4.  I cannot answer that with the information provided as I do not know your income and expenses. However, if your freelance income is put under the 3616 code (and you qualify to have your income placed under this code), you should be able to say business expenses that are related to the production of your freelance income. This would enable you to reduce your tax liability, though we cannot say whether you would get a refund or not.

* Send your questions to money@arena.africa.

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