A personal service provider, or PSP, is a company or trust interposed between a worker and a client so that one person's services are provided through an entity. SARS has rules to stop this being used to escape employees' tax.
What it means
If someone who would otherwise be an employee routes their services through a company or trust, the entity could in theory be taxed more lightly than an individual. The PSP rules counter this: where the tests are met, the payer must withhold PAYE at high fixed rates on the payment, removing the tax advantage of the structure.
Where it fits in
The PSP classification sits in the nature-of-person setup and triggers the PSP tax rates - a flat 45% for a trust, or the company rate for a company - applied like a directive. It overrides ordinary independent-contractor treatment where the tests are satisfied.
Key rules
- A company or trust providing essentially one person's services.
- Taxed at fixed PAYE rates: 45% for a trust, the company rate for a company.
- The rates remove the tax benefit of interposing an entity.
- Overrides ordinary independent-contractor treatment where the tests apply.
