Non-executive directors : employees or independent contractors for both income tax and employees' tax purposes?

Van Schalkwyk, Linda ; Nel, Rudie (2013)

CITATION: Van Schalkwyk, L. & Nel, R. 2013. Non-executive directors : employees or independent contractors for both income tax and employees' tax purposes? Journal of Economic and Financial Sciences, 6(2):a267, doi:10.4102/jef.v6i2.267.

The original publication is available at https://jefjournal.org.za

Article

The concept ‘independent contractor’ is one of the more contentious concepts contained in the Fourth Schedule to the Income Tax Act 58 of 1962, as amended. The classification of a person rendering services as either an ‘employee’ or an ‘independent contractor’ is relevant for both income tax and employees’ tax purposes. The objective of this article is to determine whether non-executive directors (both resident and non-resident) are employees or independent contractors for both purposes, respectively. A comprehensive literature review was done in which the meaning of the concepts ‘non-executive director’ and ‘independent contractor’ was discussed in order to gather information needed for the classification. The statutory and common law tests were then applied to determine the classification of non-executive directors as independent contractors. The conclusion reached is that resident non-executive directors could qualify as ‘independent contractors’ for employees’ tax and income tax purposes. Non-resident non-executive directors of companies are ‘employees’ for employees’ tax purposes and ‘independent contractors’ for income tax purposes.

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