It is that time of year again when you can expect a request from product providers to sign a Personal Services Company Affidavit. This request continues to irk advisors, yet there is nothing the product houses can do about it. I obtained the following explanation from Suzette Strydom, SAIA General Manager Technical, with the help of the Financial Intermediaries Association:
Following communication on this issue a year or so ago, we received confirmation from several of our member companies that SARS are conducting onsite visits and compliance to the requirement regarding the status of service providers are included in these on-site visits. In the event that a service provider is regarded as a Personal Service Provider (PSP) such a provider must be taxed accordingly.
The current legislation is clear and SAIA members are requesting brokers to complete affidavits with a view to determining whether the broker will be regarded as a PSP and taxed accordingly. I am also aware that ASISA members follow a similar approach.
The reason for the 3 or more unconnected employees follows as a result of attempts to circumvent tax legislation and is there to stay.
The SAIA Code of Conduct requires our members to comply with legislation and with the recent onsite visits from SARS it is expected that all insurers will conduct a compliance exercise to determine whether all service providers (including intermediaries) may be regarded as PSPs.
It is of course the right of brokers to refuse to complete the affidavit. The relevant insurer will then have to make a call whether to tax the intermediary as a PSP or alternatively to consider which other approach to follow. I will however encourage intermediaries to assist insurers in compliance with this requirement.
I can assure you that the insurers are completing this exercise as part of their legislative obligations and for no other reason. Following the four recent and very serious SARS onsite visits to SAIA Member Companies it is advisable for all parties concerned to cooperate as it is best not to have SARS on your doorstep conducting in depth audits due as a result of non-compliance of this requirement.
I recall that, in the past, Astute was asked by some of the life offices to obtain these affidavits from subscribing advisors. This meant that you only had to complete one form, rather than one for each company that you are contracted with.
It seems to be one of those schleps that we will just have to grin and bear.
Or have a beer and grim it?