Tax on commission??

[Mylolylo]

Can any tell me how tax on commission works? I earn a basic salary plus a commission on any business I write. I heard that commission is taxed at a flat rate of 40%? Anyone know how it works?

[Ryno]

Can any tell me how tax on commission works? I earn a basic salary plus a commission on any business I write. I heard that commission is taxed at a flat rate of 40%? Anyone know how it works?

 

Hi Lylo

 

Simply put commission is income earned by an individual and will be included as such in your income tax return.

 

So depending on what your total income is (fixed salary, commission, rental income, etc) one gets taxed according to the income tax scales. 18% - 40%. There are many other variables such as medical aid deductions, investment income, capital gains, fringe benefits which could also influence ones marginal tax rate.

 

cheers

[Jakkals.]

Don't stress, you'll get a refund when submitting your tax return.

[Mylolylo]

Thanks guys!

[Eugene]

There is a lot more to it. Firstly, your employer requires a Tax Directive to determine the rate of PAYE that must be witheld from your salary and paid to SARS. They will withold this amount of tax from your salary each month in the form of PAYE and pay it on your behalf to SARS. In the absence of any directive, they must withold 25% of your salary each month and pay it over.

 

The only time that you will get a refund is if they have witheld more than they need to. If your commission makes up more than 50% of your total earnings, you will be entitled to a whole lot of deductions that normal employees don't get, making a refund more likely.

 

You are welcome to PM me any questions and I'll help where I can.

Edited June 16, 2013 by Eugene

[Mads]

There is a lot more to it. Firstly, your employer requires a Tax Directive to determine the rate of PAYE that must be witheld from your salary and paid to SARS. They will withold this amount of tax from your salary each month in the form of PAYE and pay it on your behalf to SARS. In the absence of any directive, they must withold 25% of your salary each month and pay it over.

 

The only time that you will get a refund is if they have witheld more than they need to. If your commission makes up more than 50% of your total earnings, you will be entitled to a whole lot of deductions that normal employees don't get, making a refund more likely.

 

You are welcome to PM me any questions and I'll help where I can.

 

Eugene, I am not a tax fundi, but would like to ask whether you noticed that he earns a basic salary as well? I do however agree with you if he only received commission.

[ibruegge]

Did my tax return yesterday, and mentally celebrated the extra cash on my way home. Flat tyre on my car, side wall, rear tyre, replacement cost the same as the tax refund. FML. :-(

[Ostifer]

 

 

Eugene, I am not a tax fundi, but would like to ask whether you noticed that he earns a basic salary as well? I do however agree with you if he only received commission.

 

I believe that you should be taxed per the tables in the absence of a directive - not @ 25% - either way, see a tax practitioner and get specific advice

[Java001]

I believe that you should be taxed per the tables in the absence of a directive - not @ 25% - either way, see a tax practitioner and get specific advice

 

Yes, although SARS have changed their minds about this on many occassions, the below mentioned is the current position.

 

Employee works for commission only

If the employee is in possession of a tax directive, the employer MUST deduct Employees’ Tax according to the instructions on the tax directive. If the employee is not in possession of a tax directive, the employer MUST deduct Employees’ Tax according to the applicable tax deduction tables.

Employee works for salary & commission

If the employee is in possession of a tax directive, the employer MUST deduct employees’ Tax according to the instructions on the tax directive. If the employee is not in possession of a tax directive, the employer MUST combine the salary and commission and deduct Employees’ Tax according to the applicable tax deduction tables.

 

Under no circumstances may 25% or any other percentage for that matter, be deducted from remuneration, unless the tax directive so directs.

Edited July 3, 2013 by Java001