PAYE and non-residents

Employment income is generally taxed where the services are physically exercised. The place of contract conclusion, where the employer is based and where the remuneration is paid is irrelevant in determining the taxation of employment income. This principle is supported by South African legislation and case law.

Income earned from South African employers for services rendered in South Africa will be subject to South African employees’ tax. Employees’ tax refers to the amount of money that an employer who is a resident in South Africa deducts (or withholds) from an employee’s remuneration each month, which it pays over to SARS as partial payment of that employee’s annual tax liability. The amount is calculated according to the employee’s level of earnings using the applicable tax rate. The system where employees’ tax is deducted and accounted for monthly is also called Pay-As-You-Earn (“PAYE”).

The purpose of PAYE is to ensure that an employee’s income tax liability is settled while the income is earned. The advantage of this system is that the income tax liability for the year of assessment is settled over the course of the whole year of assessment. PAYE is therefore a withholding tax on employment income, which will be offset against the employee’s final income tax liability for the year of assessment.

The obligation to withhold PAYE on remuneration paid by an employer to its employees is regulated in the Fourth Schedule to the Income Tax Act No 58 of 1962. The Act, in this regard, omits to draw a distinction between residents and non-residents and simply emphasises the importance of an employer-employee relationship and the fact that the former has an obligation to pay the latter an amount that constitutes remuneration. Remuneration can be defined as any amount of income which is paid or is payable to an individual by way of any salary, bonus, gratuity payments, etc.

South African-sourced employment income that a non-resident of South Africa earns is subject to monthly employees’ tax if it is paid by an employer who is a tax resident in South Africa. Other income from a South African source is also subject to South African income tax and may be subject to provisional tax. Where the employer is not a resident of South Africa, employees’ tax must be deducted either by an agent or representative who has the authority to pay the remuneration to the non-resident employee.

The mere fact that an employee is a provisional taxpayer does not exempt an employer from its obligation to withhold employees’ tax on such an employee’s employment income. The only instance in which South African employers are absolved from withholding PAYE from an employee’s salary is where a non-tax resident derives employment income in respect of employment services rendered abroad.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)




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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.