Secondary

Astute Enquiry regarding Tax Status of FSPs

We received some very emotional correspondence on this issue.

The crux of the matter appears to be the wide application by SARS to what it terms a “Personal Service Provider”.

The request from Astute explains it as follows: ‘Personal Service Providers’ are specific types of employees in the Income Tax Act no. 58 of 1962 (‘the Act’). All product providers are obliged to deduct employee’s tax (PAYE) from all remuneration paid to companies, close corporations and trusts, that meet the definition of a ‘personal service provider’ (PSP) in the Act.

Thus, if you wish to be excluded from this definition, you need to complete the Astute questionnaire, which is then sent to all the product providers that you are contracted with. If you are not approached by Astute, or the insurer, it means that your product provider is applying the obligation in a different manner.

The biggest gripe appears to be that one has to do this annually.

We approached the FIA in this regard to establish how they handle it. Justus van Pletzen, CEO of the FIA, responded as follows:

We communicate this to our members quite regularly, and SAIA has also communicated it to their members on a few occasions.

Some insurers appointed Astute to obtain the information annually. This arrangement makes it easier for the intermediary who is responsible to inform all Insurers. Whether all the insurers apply the rule is hard to say, but some insurers are not happy with the arrangement as the feeling is that those who do not apply receive more business for obvious reasons.

In the end (or at least for now) it is a business decision whether an Insurer wants to take the risk or not. We discussed this matter on Friday and the only solution to the problem is to ensure that all insurers apply the rule OR to convince the Receiver to change the Act.

In my opinion, this is an unnecessary obligation which should be taken up with SARS by the bodies representing the product houses. Rather than go through the same process year after year, address the definition issue with SARS and allow FSPs to carry on with their business. Too much time is being wasted on side-shows of this nature.

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