GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY

Transcription

1 SOUTH AFRICAN REVENUE SERVICE GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY Anther helpful guide brught t yu by the Suth African Revenue Service

2 GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY Frewrd This dcument is a general guide dealing with the Pay-As-Yu-Earn (PAYE) respnsibility f prductin cmpanies with regard t the agents and the PAYE status f the artists/mdels/crew. This guide des nt attempt t reflect n every scenari that culd pssibly exist but des attempt t prvide clarity n the majrity f issues that are likely t arise in practice. If it des nt address a specific issue, it must be taken up with the SARS branch ffice. This guide is nt meant t deal with the precise technical and legal detail that is ften assciated with taxatin and shuld, therefre, nt be used as a legal reference. It is nt a binding general ruling in terms f Part IA f Chapter III f the Incme Tax Act, N. 58 f 1962 (the Act). This guide is based n the legislatin as at 31 Octber Shuld yu require additinal infrmatin, yu may cntact yur lcal Suth African Revenue Service (SARS) branch; visit SARS website at cntact yur wn tax advisr/tax practitiner; if calling lcally, cntact the SARS Natinal Call Centre n ; r if calling frm abrad, cntact the SARS Natinal Call Centre n Cmments and/r suggestins regarding this guide may be sent t the fllwing address: plicycmments@sars.gv.za. Prepared by Legal and Plicy Divisin SOUTH AFRICAN REVENUE SERVICE Date f issue: August 2008 GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY i

3 CONTENTS Frewrd... i 1. PURPOSE THE PAYE RESPONSIBILITY OF PRODUCTION COMPANIES WITH REGARD TO THE AGENT Hw the industry perates What the law says Hw the law applies t the facts and the effect theref Whether the agent is a labur brker Wh is liable t deduct PAYE Cnclusin THE PAYE STATUS OF ARTISTS/MODELS/CREW The types f artists/mdels/crew Hw the law currently determines the PAYE status f artists/mdels/crew The cmmn law general rules The statutry rules Interpretatin Nte N Hw the law applies t the types f artists/mdels/crew in the film industry The cmmn law dminant impressin test The statutry test United States f America (USA) mdel Status f particular crew... 8 (a) Key gaffer/lighting directr... 8 (b) Directr f phtgraphy (DP)... 9 (c) Key grip (d) Lcatin scut (e) Art directr Artists/mdels/crew cntracting thrugh a medium f a legal entity The IRP5 requirements in the case f: Emplyees (cmmn law) Independent cntractrs that are deemed nt t be independent Independent cntractrs that are deemed t be independent (i.e. thse that remain independent even fr PAYE purpses) Persnal service cmpanies r trusts LIMITATION OF EXPENSES SKILLS DEVELOPMENT LEVY UNEMPLOYMENT INSURANCE CONTRIBUTIONS (UIF) CONCLUSION GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY ii

4 1. PURPOSE The purpse f this brchure is t deal with the PAYE (Pay-As-Yu-Earn) respnsibility f prductin cmpanies in respect f the agents and als the PAYE status f crew/artists/mdels. 2. THE PAYE RESPONSIBILITY OF PRODUCTION COMPANIES WITH REGARD TO THE AGENT 2.1 Hw the industry perates It is a general practice in the film industry fr artists/mdels/crew t apprach agents t manage their careers. When an artist/mdel/crew chses a particular agent, an agreement is signed and an administratin fee (agency fee/cmmissin) is agreed upn between the artist/mdel/crew and the agent. The agent will prmte the artist/mdel/crew t the best f his r her ability thrugh media and printed materials. The agent will suggest the actr fr specific parts and will send him r her t applicable auditins (where applicable). Shuld the artist/mdel/crew be successful in getting a rle r wrk, the agent s respnsibility nrmally includes negtiating a fee with the prductin cmpany n behalf f an artist/mdel/crew (the agent has t ensure that the actr is prperly cntracted, treated fairly and that the actr receives payment as agreed in the artist/mdel/crew s cntract with the prductin cmpany). The prductin cmpany will then enter int an agreement with the artist/mdel/crew t render the required service. The agent, as part f the wide range f administrative services they prvide, wuld invice the prductin cmpany n behalf f the artist/mdel/crew and the fees are paid directly int the agent s bank accunt. It is understd that sme prductin cmpanies wuld pay the fee due t the artist/mdel/crew net f tax int the agent s bank accunt (that is, the prductin cmpany first deducts emplyees tax) and sme will pay the grss fee int the agent s bank accunt (in cases where the prductin cmpany des nt deduct emplyees tax). Where the frmer, applies, the agent will then deduct his r her fee (cmmissin) payable by the artist/mdel/crew and the difference is paid t the artist/mdel/crew. The prductin cmpany pays the emplyees tax deducted ver t SARS and issues an IRP5 emplyees tax certificate t the artist/mdel/crew. Hwever, where the latter applies, the agent will deduct his r her fee and emplyees tax and the difference is paid t the artist/mdel/crew. The agent pays the emplyees tax deducted ver t SARS (under its PAYE reference number) and issues an IRP5 certificate. In additin t the agent s fee/cmmissin charged by the agent t the artist/mdel/crew, the agent wuld charge the bking fee t the prductin cmpany. In sme instances, the agent issues a separate invice t the prductin cmpany in respect f this fee and an inclusive invice (artist/mdel/crew and agent s fees) in ther instances. The abve arrangement (where the agent deducts r withhlds emplyees tax) creates uncertainty in the industry. That is, whether agents are labur brkers and wh is liable t withhld emplyees tax, in ther wrds, wh is the emplyer? GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 1

5 2.2 What the law says A labur brker is defined in paragraph 1 f the Furth Schedule t the Incme Tax Act, 1962 (the Act) as any persn wh cnducts r carries n any business whereby such persn fr reward prvides a client f such business with ther persns t render services r perfrm wrk fr such client, r prcures such ther persns fr the client, fr which services r wrk such ther persns are remunerated by such persn. Based n the abve, the fllwing is required fr a persn t be regarded a labur brker: The persn must prvide clients with ther persns t render a service r perfrm wrk fr such clients this means that the agreement between the client and a labur brker must be t prvide persns and nt t render a service r t perfrm the wrk required by the client. In a labur brker arrangement, there are three parties invlved being the client, a persn prviding persns (labur brker) and a persn being prvided t the client. The client will enter int an agreement with the labur brker t prvide persns at an agreed fee. On the ther hand, the labur brker will enter int an agreement (mstly an emplyment agreement) with a persn t be prvided t the client. There will, therefre, be n agreement between the client and the persn being prvided. The persn prviding ther persns (labur brker) must be rewarded by the client the client must pay the labur brker fr prviding ther persns (the client has an bligatin (created by the cntract t prvide persns) t pay the labur brker a fee). The persn prviding ther persns t the client must reward the ther persns fr their services r wrk perfrmed t the client The labur brker must pay remuneratin and deduct emplyees tax frm amunts payable by the labur brker t the persns prvided by the labur brker t the client. The payment made by the labur brker t ther persns prvided t the client f the labur brker by the labur brker is an bligatin arising frm the cntract between the labur brker and the persn being prvided t the client (nrmally an emplyment cntract as indicated abve). All the requirements fr a persn t be classified as a labur brker must be present befre a persn culd be regarded as a labur brker. Where a persn is classified as a labur brker and such persn des nt pssess an IRP30 exemptin certificate, the client must deduct emplyees tax frm the amunts payable t that persn at the applicable rate. In terms f paragraph 2(1) f the Furth Schedule t the Act, the emplyer wh is liable t pay any amunt by way f remuneratin t any emplyee shall, unless the Cmmissiner fr SARS has granted authrity t the cntrary, deduct r withhld emplyees tax frm that amunt. The term emplyer is defined in paragraph 1 f the Furth Schedule. In simply terms, the emplyer is any persn wh pays r is liable t pay remuneratin. 2.3 Hw the law applies t the facts and the effect theref Whether the agent is a labur brker As stated abve, all the requirements fr a persn t be classified as a labur brker must be present befre a persn culd be regarded as a labur brker. The requirements as utlined abve are as fllws: GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 2

6 The persn must prvide clients with ther persns t renders a service r perfrm wrk fr such clients as stated abve, this requirement requires that a persn wh is a labur brker (persn prviding persns) must enter int an agreement with the client (persn being prvided with persns) t prvide such persns (nt t render the service required by a client). There is n agreement between the persn being prvided (emplyee f the labur brker) and the client. The nrm in the film industry, as utlined abve, is that the agent intrduces and facilitates an agreement between the artist/mdel/crew and the prductin cmpany. The prductin cmpany and the artist/mdel/crew will then enter int an agreement (artist/mdel/crew t prvide specified services). The agent is nt prviding persns but merely intrducing and facilitating the agreement between the prductin cmpany and the artist/mdel/crew. The agent is, therefre, playing a rle f the emplyment agency. The emplyment agency rle is t intrduce prspective emplyees t emplyers r t find emplyees fr an emplyer. Once the intrductin has been made, the emplyee is remunerated by the emplyer (as a result f the emplyment agreement entered int by the emplyer and the emplyee) and the emplyment agency is paid a nce-ff fee by the emplyer. The persn prviding ther persns (labur brker) must be rewarded by the client as stated abve, the client must pay the labur brker fr prviding ther persns (the client has an bligatin (created by the cntract t prvide persns) t pay the labur brker a fee). The nrm in the film industry is that the prductin cmpany s nly bligatin is t pay the bking fee t the agent. As stated abve, the agent is nt prviding persns but merely playing a rle f the facilitatr between the prductin cmpany and the artist/mdel/crew. Accrdingly the bking fee is nt a fee fr prviding persns. Furthermre, the fact that the prductin cmpany wuld pay the full fee t the agent wh will in turn deduct emplyees tax and his r her cmmissin, des nt change the fact that the fee fr services rendered by the artist/mdel/crew is due t the artist/mdel/crew and nt the agent. This is merely an arrangement between the parties. The persn prviding ther persns t the client must reward the ther persns fr their services r wrk perfrmed t the client in a labur brker arrangement, a labur brker has the bligatin t pay the persns prvided t the client and t withhld emplyees tax frm such amunts. In the film industry scenari, the agent des nt have an bligatin t pay the artist/mdel/crew. Where the prductin cmpany pays the full amunt t the agent and the agent deducts emplyees tax, this is merely an arrangement between the parties. The prductin cmpany has the bligatin t pay remuneratin t the artist/mdel/crew and t deduct emplyees tax (the parties t the agreement are the prductin cmpany and the artist/mdel/crew). If the agent received a full fee frm the prductin cmpany and then disappeared, the prductin cmpany wuld still be liable fr the payment f the fee t the artist/mdel/crew. As stated abve, all the requirements f the definitin f labur brker must be met befre a persn culd be classified t be a labur brker, which is nt the case in this instance. The agent will, therefre, nt be classified as labur brker where the artist/mdel/crew has entered int an agreement with the prductin cmpany. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 3

7 2.3.2 Wh is liable t deduct PAYE As stated abve, the emplyer wh is liable t pay any amunt by way f remuneratin is required t deduct r withhld emplyees tax frm such amunt. The parties t the service agreement are the prductin cmpany and the artist/mdel/crew. Accrdingly, it is the prductin cmpany s bligatin t pay a fee t the artist/mdel/crew and nt that f the agent. If the prductin cmpany disappears withut making payment t the artist/mdel/crew, the agent will nt be held liable and wuld nt need t make the payment t the artist/mdel/crew. Agents wuld fight fr their artists/mdels/crew and try t assist them but wuld nt pay them (the cntract f service is between the artist/mdel/crew and the prductin cmpany). Where the artist/mdel/crew is an emplyee r deemed nt be independent, the fee payable t the artist/mdel/crew wuld be remuneratin. The prductin cmpany will be liable t pay remuneratin and therefre has an bligatin t deduct r withhld emplyees tax and nt the agent. Hwever, where the agent enters int an agreement with the prductin cmpany t prvide artists/mdels/crew (that is, n relatinship exists between the artist/mdel/crew and the prductin cmpany), the agent will be regarded t be a labur brker. Accrdingly, it will be the agent s bligatin t pay the artist/mdel/crew and nt that f the prductin cmpany. Where such an arrangement exists, the prvisins relating t labur brkers will apply as fllws: The prductin cmpany will deduct emplyees tax n amunts payable t the agent fr prviding persns if the agent is nt in pssessin f a valid IRP30 exemptin certificate. The artist/mdel/crew will be regarded t be an emplyee f the agent (in terms f paragraph (b) f the definitin f emplyee in paragraph 1 f the Furth Schedule t the Act). Accrdingly, the agent will have an bligatin t deduct r withhld emplyees tax frm the amunt payable t the artist/mdel/crew by the agent. 2.4 Cnclusin It is evident frm the abve that where the artist/mdel/crew cntracts directly with the prductin cmpany t render services (cntract in their persnal capacity), the prductin cmpany is the emplyer (agents are nt regarded as labur brkers). The prductin cmpany must deduct r withhld emplyees tax where applicable (where the artist/mdel/crew is deemed nt be independent either by reasn f the statutry test r cmmn law test see paragraph 3.2 belw). Where the agent meets the definitin f labur brker, the labur brker prvisins as utlined abve will apply. This arrangement des exist in the film industry (that is, where agents actually act as labur brkers and this may be the case, generally, with extras). 3. THE PAYE STATUS OF ARTISTS/MODELS/CREW 3.1 The types f artists/mdels/crew Artists/mdels/crew will generally fall under the fllwing: In frnt f camera artists/mdels (including characters, extras) fall under this categry. Behind the camera crew (art directr, sund technician, camera peratr etc) fall under this categry. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 4

8 3.2 Hw the law currently determines the PAYE status f artists/mdels/crew The cmmn law general rules The current psitin is that the dminant impressin test (the Test) must be applied t determine whether a persn is independent r an emplyee. The Test makes use f several indicatrs, f differing significance r weight, which have t be applied in the relevant cntext. N single indicatr is cnclusive. The Test is mre f an analytical tl that is designed t establish the independence f a persn The statutry rules The statutry rules perate independently frm the cmmn law rules. The statutry rules prvide fr a deeming prvisin that a persn wh carries n his r her trade independently (that is, a persn deemed t be an independent cntractr in terms f cmmn law rules) shall be deemed nt be carrying n a trade independently if he r she meets any f the statutry test prvisins Interpretatin Nte N.17 Interpretatin Nte N.17 issued by SARS deals with the abve tw rules (cmmn law and statutry rules) in detail and can be accessed thrugh the SARS website Hw the law applies t the types f artists/mdels/crew in the film industry The cmmn law dminant impressin test The cmmn law dminant impressin test sets ut 20 f the mre cmmn indicatrs (nt exhaustive) which pint t whether r nt there has been the acquisitin f prductive capacity (that is, labur pwer, capacity wrk r simply effrt). The indicatrs are classified int three categries, namely near cnclusive thse relating mst directly t the acquisitin f prductive capacity ; persuasive thse establishing the degree f cntrl f the wrk envirnment ; and resnant f either an emplyee/emplyer relatinship r an independent cntractr/client relatinship, which are relevant. It is imprtant t nte that this is a guide and shuld nt be used as a checklist accrding t which certain scres are determined t cme t a cnclusin. Each indicatr must be analysed with due regard t the cntext f the film industry. Where a persn is regarded as an emplyee, based n the cmmn law test, the persn will be regarded as an emplyee in terms f paragraph (a) f the definitin f emplyee in paragraph 1 f the Furth Schedule t the Act. Accrdingly, the amunts payable t him r her by his r her clients will be subject t emplyees tax and must be cded 3601 n the IRP5 certificate. The prvisins f sectin 23(m) f the Act will apply (limitatin f deductins). Hwever, where a persn is regarded as an independent cntractr, based n the cmmn law dminant impressin test, the persn will be carrying n his r her trade independently. The next step will be t apply the statutry test t determine whether r nt the cmmn law independent cntractr is deemed nt t be independent fr the purpses f the Furth Schedule t the Act. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 5

9 3.3.2 The statutry test The statutry test prvisins are fund in the exclusinary subparagraph (ii) f the definitin f remuneratin in paragraph 1 f the Furth Schedule t the Act. This paragraph states that any amunt paid r payable in respect f services rendered r t be rendered by any persn (excluding nn-residents) in the curse f any trade carried n by him r her independently f the persn by whm such amunt is paid r payable r f the persn t whm the services have been r are t be rendered (that is, amunt payable t a cmmn law independent cntractr) is excluded frm the definitin f remuneratin (the amunt is nt subject t emplyees tax but hwever frms part f grss incme f that persn). This paragraph further prvides that such a persn (cmmn independent cntractr) will be deemed nt t carry n a trade independently fr the purpses f the Furth Schedule t the Act if the services are required t be perfrmed mainly at the premises f the client; and the persn wh rendered r will render the services is subject t the cntrl r supervisin f any ther persn as t the manner in which his r her duties are perfrmed r are t be perfrmed r t his r her hurs f wrk. This paragraph prvides further that a persn (cmmn law independent cntractr) will be deemed t be carrying n an independent trade if he r she thrughut the year f assessment emplys three r mre emplyees wh are n a full-time basis engaged in the business f such persn f rendering any such service (excluding any emplyee wh is a cnnected persn in relatin t such persn). It is the respnsibility f the emplyer (prductin cmpany in the case f the film industry r any ther persn in the industry engaging the services f the artist/mdel/crew) t determine whether the statutry test applies. The emplyer is in the best psitin t evaluate the facts and the actual situatin (the prductin cmpany understand the terms f the agreement and the actual wrking relatinship better). Furthermre, when determining whether r nt a persn is subject t cntrl r supervisin, it is imprtant t make sure that industry requirements are nt cnfused t be cntrl r supervisin. Fr example, if the crew is tld t be at the sht lcatin by 08:00 (because the sht starts at 08:00), that des nt amunt t cntrl r supervisin. Hwever, if during the sht the crew is given instructins n hw t d the wrk r get t the desired result (fr example, instructin t the cameraman t tape/sht in a certain way etc) this will amunt t cntrl r supervisin. In determining whether r nt the statutry test applies t the artist/mdel/crew wh is an independent cntractr in terms f cmmn law rules, the fllwing step must be fllwed: Determine whether an independent cntractr emplys thrughut the tax year f assessment three r mre emplyees wh are n a full-time basis engaged in the business f the independent cntractr f rendering services and wh are nt cnnected persns in relatin t the independent cntractr - If this is nt the case, prceed t the next step. If this is the case, the independent cntractr is deemed t be carrying n a trade independently and accrdingly the amunts payable t him r her by the prductin cmpany is nt subject t emplyees tax. The prductin cmpany will nt be required t issue an IT 3(a) certificate. Determine whether the services are required t be perfrmed mainly at the premises f the client (sht lcatin) - If this is the case, prceed t the next step. If this is nt the case, the independent cntractr is carrying n a trade independently and accrdingly the amunt payable t him r her by the prductin cmpany is nt subject t emplyees tax. The prductin cmpany will nt be required t issue an IT 3(a) certificate. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 6

10 Determine whether ne f the fllwing is true: The persn wh rendered r will render the services is subject t the cntrl f the client as t the manner in which his r her duties are perfrmed r t be perfrmed r as t his r her hurs f wrk. The persn wh rendered r will render the services is subject t the supervisin f the client as t the manner in which his r her duties are perfrmed r t be perfrmed r as t his r her hurs f wrk. If any f the abve tw tests apply (that is, cntrl r supervisin), the independent cntractr is deemed nt t be independent fr the purpses f the Furth Schedule t the Act. Accrdingly, the amunts payable t him r her by the prductin cmpany is subject t emplyees tax. Since this is a cmmn law independent cntractr deemed nt t be carrying n a trade independently fr the purpses f the Furth Schedule t the Act nly, the remuneratin must be cded 3616 n the IRP5 certificate. Furthermre, the limitatin f deductins in terms f sectin 23(m) f the Act will nt apply. Based n the abve, the artists/mdels/crew may fall under the fllwing categries depending n their cntractual agreement and functins: A. Cmmn law independent cntractrs emplying three r mre qualifying emplyees the prductin cmpany will have t establish this fact n signing f the agreement and must retain the relevant prf. As stated abve, these persns are nt subject t emplyees tax. B. Cmmn law independent cntractrs nt emplying three r mre qualifying emplyees and perfrming their duties mainly utside the sht lcatin these independent cntractrs fall under categry ne under the USA mdel as utlined in paragraph These persns will nt be subject t emplyees tax deductin because their duties will nt be perfrmed mainly at the sht lcatin (that is, they perfrm mre than 50% f their duties (functins) utside the sht lcatin). C. Cmmn law independent cntractrs nt emplying three r mre qualifying emplyees and perfrming their duties mainly at the sht lcatin i. N cntrl r supervisin These independent cntractrs fall under categry tw and three under the USA mdel as utlined in paragraph They d mst if nt all f their duties at the sht lcatin. If they are nt subject t cntrl r supervisin as t the manner f wrk r hurs f wrk, these persns will nt be subject t emplyees tax deductin. ii. Cntrl r supervisin These independent cntractrs fall under categry tw and three under the USA mdel as utlined in paragraph They d mst if nt all f their duties at the sht lcatin. If they are subject t cntrl r supervisin as t the manner f wrk r hurs f wrk, these persns will be subject t emplyees tax deductin. Cde 3616 shuld be used n their IRP5 certificate. Artists/mdels nt falling under categry D (emplyees in terms f cmmn law), will always fall under this categry. D. Emplyee in terms f cmmn law these are artists/mdels/crew wh have entered int an emplyment agreement with the prductin cmpany (that is, emplyer-emplyee relatinship which is a master-servant relatinship). Fr example, a camera-man r an actr wh has entered int an emplyment agreement with the prductin cmpany (masterservant relatinship) will fall under this categry. The sapies are the cmmn prductins where the main actrs r maybe camera-man wuld enter int an emplyment agreement because they run fr a lengthy perid f time (fr example, Generatins, 7de Laan etc). GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 7

11 3.3.3 United States f America (USA) mdel The Internal Revenue Service in the United States f America develped a Guide fr the Televisin Cmmercial Prductin and Prfessinal Vide Cmmunicatin Industries. This guide is funded n 20 cmmn law factrs t determine a persns classificatin as an emplyee r independent cntractr. Furthermre, the guide categrises the persns int three categries namely: Categry ne jbs invlving planning r implementatin f the cmmercial and/r vide prductin (fr example, art directr, casting directr, lcatin scut etc). These persns typically have substantial respnsibilities in additin t appearing at the sht (these are ften perfrmed away frm the lcatin). In terms f the statutry test, these wuld be persns wh d nt perfrm their wrk mainly at the premises f the client (that is, at the sht lcatin). Categry tw jbs invlving planning, design r implementatin f specific aspects f the cmmercial and/r vide prductin and jbs invlving bth prblem-slving and technical skills (fr example, audi technician, cstume designer, lighting directr etc). These persns ften have respnsibilities away frm the lcatin, but these respnsibilities are a smaller percentage f their ttal respnsibilities. Categry three ther jbs nt mentined abve (fr example, bm peratr, camera assistant, generatr peratr etc). These persns wuld d mst, if nt all, f the wrk at the sht lcatin. In terms f this guide, the greater the percentage f time spent at the sht lcatin, the mre likely it is that the persn is subject t detailed instructins abut hw t perfrm his r her wrk (indicative f emplyee status). It is imprtant t nte that these categries merely indicate relative individual autnmy, withut being indicative f a given persn s status. Hwever, in practice, the prbability that a persn is an independent cntractr will be greater in categry ne than in categry three Status f particular crew It is evident frm the abve that the crew may fall under different categries depending n the nature f the agreement and their functins (as stated abve, the artists/mdels will always fall under Categry C(ii) r D depending n whether r nt they are emplyees r independent cntractrs in terms f cmmn law). An understanding f the functins f crew and the knwledge f the industry is required fr the crrect categrisatin f crew fr tax purpses. The fllwing crew is categrised as fllws: (a) Key gaffer/lighting directr The lighting directr is respnsible fr the creative, effective and efficient design and delivery f lighting fr films, televisin prductins, f all prgramme types, bth in studis and n utside bradcasts/lcatins shts. They will wrk clsely with the directr and prductin designer t establish the md, setting and perid f each scene, and the crrespnding lighting effects desired r required at each stage f the prductin. This rle may als be perfrmed by the directr f phtgraphy, and has many verlaps with the camera grades. Tasks will include designing lighting layuts, rganising lighting effects and mnitring pictures t meet prductin requirements. They supervise the cnsle peratr and will liaise with the gaffer t achieve the desired lighting effects thrughut the prductin. They will als have health and safety respnsibility fr the lighting team, and must be aware f all ptential risks affecting the crew. The lighting directr is als respnsible fr the lighting budget, the hiring f sub-cntractrs and the management f the lighting crew. In determining the status f the key gaffer/lighting directr the fllwing steps as utlined belw will be fllwed: GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 8

12 Cmmn law test it is understd (frm the submissins made by the industry t SARS) that the key gaffer/lighting directr uses his r her wn equipment (camera equipment, vehicle and cmputers) and that he r she can elect t emply a persn in his r her stead. They have numerus clients (generally prductin cmpanies). That being the case, this is a typical cmmn law independent cntractr. The next step, therefre, is t determine whether the statutry test applies. Statutry test the steps utlined belw will be fllwed in determining whether the statutry test applies: Des the key gaffer/lighting directr emply three r mre qualifying emplyees? This is a questin f fact. Where the answer is yes, the key gaffer/lighting directr will be deemed t be independent and will accrdingly nt be subject t emplyees tax deductin. Where the answer is n, prceed t the next step. Des the key gaffer/lighting directr perfrm his r her duties mainly at the premises f the client (sht lcatin)? In terms f the guide issued by the Internal Revenue Service in USA, the key gaffer/lighting directr falls under categry tw. In terms f this guide, the crew falling under categry tw, ften has sme respnsibilities away frm the lcatin, but these are a smaller percentage f their ttal respnsibilities. Based n this guide, the answer t the abve questin will be yes and will, therefre, have t prceed t the next step. Where it can be prved that this crew perfrms his r her duties mainly utside the sht lcatin, the key gaffer/lighting directr will be deemed t be independent and accrdingly nt subject t emplyees tax deductin. Is the key gaffer/lighting directr subject t cntrl r supervisin as t the manner f wrk r hurs f wrk? It is understd (frm the submissins made by the industry t SARS) that the key gaffer/lighting directr is at n time subject t cntrl r supervisin f the prductin cmpany. That being the case, the key gaffer/lighting directr is deemed t be independent and accrdingly nt subject t emplyees tax deductin. Please nte that if at any stage the key gaffer/lighting directr is subject t cntrl r supervisin, he r she will be deemed nt t be independent and wuld be subject t emplyees tax deductin. The remuneratin wuld be cded 3616 n the IRP5 certificate. (b) Directr f phtgraphy (DP) The DP is respnsible fr capturing f the creative idea f the prductin, as interpreted by the directr, n film r vide. The DP is retained n the basis f his r her unique talents fr filming the type f cmmercial r prgramme t be prduced. The DP is bth a technician and an artist. Thus, while the directr explains his r her visin t the DP, the DP must decide the best manner in which t transfer that visin t film r vide. This requires the DP t make creative decisins as t items such as camera lenses, lens filters, shutter speed, film speed and lighting. The prductin cmpany will rely n the DP t determine what equipment needs t be btained fr the prject and will defer t the determinatin f the DP, subject t budgetary cnstrains. In determining the PAYE status f the DP the fllwing steps as utlined belw will be fllwed: Cmmn law test it is understd (frm the submissins made by the industry t SARS) that the DP uses his r her wn equipment (camera equipment, vehicle and cmputers) and that he r she can elect t emply a persn in his r her stead. They have numerus clients (generally prductin cmpanies). That being the case, this is a typical cmmn law independent cntractr. The next step, therefre, is t determine whether the statutry test applies. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 9

13 Statutry test the steps utlined belw will be fllwed in determining whether the statutry test applies: Des the DP emply three r mre qualifying emplyees? This is a questin f fact. Where the answer is yes, the DP will be deemed t be independent and will accrdingly nt be subject t emplyees tax deductin. Where the answer is n, prceed t the next step. Des the DP perfrm his r her duties mainly at the premises f the client (sht lcatin)? In terms f the guide issued by the Internal Revenue Service in USA, the DP falls under categry ne. In terms f this guide, the crew falling under categry ne typically has substantial respnsibilities in additin t appearing at the sht lcatin and these are ften perfrmed away frm the sht lcatin. Based n this guide, the answer t the abve questin will be n. Accrdingly, the DP will be deemed t be independent and will nt be subject t emplyees tax deductin. Furthermre, it is understd (frm the submissins made by the industry t SARS) that the DP is at n time subject t cntrl r supervisin f the prductin cmpany. That being the case, the DP wuld still be deemed t be independent even if he r she was perfrming his r her duties mainly at the sht lcatin. (c) Key grip On the prelate (prir t the sht) the key grip lads in the equipment and sets up the stand t supprt lights r any ther hanging elements, sets up dllies and tracks, cranes, sets etc. On the sht, the key grip perates the dlly and/r crane, and mves any heavy equipment and lads in and ut. In determining the status f the key grip the fllwing steps as utlined belw will be fllwed: Cmmn law test it is understd (frm the submissins made by the industry t SARS) that the key grip uses his r her wn equipment and that he r she can elect t emply a persn in his r her stead. They have numerus clients (generally prductin cmpanies). That being the case, this is a typical cmmn law independent cntractr. The next step, therefre, is t determine whether the statutry test applies. Statutry test the steps utlined belw will be fllwed in determining whether the statutry test applies: Des the key grip emply three r mre qualifying emplyees? This is a questin f fact. Where the answer is yes, the key grip will be deemed t be independent and will accrdingly nt be subject t emplyees tax deductin. Where the answer is n, prceed t the next step. Des the key grip perfrm his r her duties mainly at the premises f the client (sht lcatin)? In terms f the guide issued by the Internal Revenue Service in USA, the key grip falls under categry tw. In terms f this guide, the crew falling under categry tw, ften has sme respnsibilities away frm the lcatin, but these are a smaller percentage f their ttal respnsibilities. Based n this guide, the answer t the abve questin will be yes and will, therefre, have t prceed t the next step. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 10

14 Is the key grip subject t cntrl r supervisin as t the manner f wrk r hurs f wrk? It is understd (frm submissin made by the industry t SARS) that the key grip is at n time subject t cntrl r supervisin f the prductin cmpany. That being the case, the key grip is deemed t be independent and accrdingly nt subject t emplyees tax deductin. Please nte that if at any stage the key grip is subject t cntrl r supervisin, he r she will be deemed nt t be independent and wuld be subject t emplyees tax deductin. The remuneratin wuld be cded 3616 n the IRP5 certificate. (d) Lcatin scut The lcatin scut is respnsible fr finding the lcatin at which a particular prductin will be filmed, based n the directr s creative desires and prductin lgistics, such as whether a lcatin will accmmdate a particular camera angle. Knwledge f gegraphy, climatic cnditins and restrictins f lcal rdinances is essential. The lcatin scut is als respnsible fr initiating rate negtiatins with the wner f a lcatin, drawing maps fr the crew and securing parking. On set, the lcatin scut acts as a liaisn between the wners f the lcatin and the prductin staff. In determining the PAYE status f the lcatin scut the fllwing steps as utlined belw will be fllwed: Cmmn law test it is understd (frm the submissins made by the industry t SARS) that the lcatin scut uses his r her wn equipment and develps databases f lcatin fr which he may nt receive payment. He r she can elect t emply a persn in his r her stead. They have numerus clients (generally prductin cmpanies). That being the case, this is a typical cmmn law independent cntractr. The next step, therefre, is t determine whether the statutry test applies. Statutry test the steps utlined belw will be fllwed in determining whether the statutry test applies: Des the lcatin scut emply three r mre qualifying emplyees? This is a questin f fact. Where the answer is yes, the lcatin scut will be deemed t be independent and will accrdingly nt be subject t emplyees tax deductin. Where the answer is n, prceed t the next step. Des the lcatin scut perfrm his r her duties mainly at the premises f the client (sht lcatin)? In terms f the guide issued by the Internal Revenue Service in USA, the Lcatin Scut falls under categry ne. In terms f this guide, the crew falling under categry ne typically has substantial respnsibilities in additin t appearing at the sht lcatin and these are ften perfrmed away frm the sht lcatin. Based n this guide, the answer t the abve questin will be n. Accrdingly, the lcatin scut will be deemed t be independent and will nt be subject t emplyees tax deductin. (e) Art directr The art directr is respnsible fr transferring the artistic requirements f a film r vide prductin int the design and cnstructins f a set. After discussing the prject with the directr and perhaps researching the prper lk fr it, the art directr will then create sketches and drawings t prvide the directr with several ptins fr the lk f the set. After a chice is made, the art directr will present a bid and master plan fr set cnstructin, cntract with an apprpriate set cnstructin cmpany, select a suitable stage t decrate the set and arrange fr the remval f the set after filming. In determining the PAYE status f the art directr the fllwing steps as utlined belw will be fllwed: GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 11

15 Cmmn law test it is understd (frm the submissins made by the industry t SARS) that the lcatin scut uses his r her wn equipment (prps, ffice equipment, vehicle and cmputers) and develps additinal prps that may be required fr future prductins. He r she can elect t emply a persn in his r her stead. They have numerus clients (generally prductin cmpanies). That being the case, this is a typical cmmn law independent cntractr. The next step, therefre, is t determine whether the statutry test applies. Statutry test the steps utlined belw will be fllwed in determining whether the statutry test applies: Des the art directr emply three r mre qualifying emplyees? This is a questin f fact. Where the answer is yes, the art directr will be deemed t be independent and will accrdingly nt be subject t emplyees tax deductin. Where the answer is n, prceed t the next step. Des the art directr perfrm his r her duties mainly at the premises f the client (sht lcatin)? In terms f the guide issued by the Internal Revenue Service in USA, Art Directr falls under categry ne. In terms f this guide, the crew falling under categry ne typically has substantial respnsibilities in additin t appearing at the sht lcatin and these are ften perfrmed away frm the sht lcatin. Based n this guide, the answer t the abve questin will be n. Accrdingly, the art directr will be deemed t be independent and will nt be subject t emplyees tax deductin. 3.4 Artists/mdels/crew cntracting thrugh a medium f a legal entity Where the artist/mdel/crew cntracts with the prductin cmpany thrugh a medium f a legal entity (that is, cmpany, clse crpratin r trust) the cmmn law and statutry rules will nt apply. The prductin cmpany will, therefre, have t determine whether the prvisins relating t the persnal service cmpany r persnal service trust apply. A persnal service cmpany r persnal service trust is defined in paragraph 1 f the Furth Schedule t the Act (see Interpretatin Nte N. 35 available n the SARS website fr a detailed discussin n persnal service cmpanies r trusts). Where the prvisins relating t persnal service cmpany r persnal service trust apply, the cmpany r clse crpratin r trust will be subject t emplyees tax deductin. The persnal service cmpany is subject t tax at a rate f 34% while the persnal service trust is subject t tax at a rate f 40%. Furthermre, the persnal service cmpanies r trusts are subject t the prvisins f sectin 23(k) f the Act (limitatin f deductins). 3.5 The IRP5 requirements in the case f: Emplyees (cmmn law) An emplyer must, in terms f paragraph 13(1) f the Furth Schedule t the Act, furnish an emplyee t whm remuneratin has been paid r becme due and frm which emplyees tax has been deducted r withheld during the year f assessment, with an IRP5 emplyees tax certificate. In terms f paragraph 13(2) f the Furth Schedule t the Act, the IRP5 certificate must be issued as fllws: Where the emplyer has nt ceased t be an emplyer in relatin t the emplyee cncerned, within 60 days after the end f the tax year (that is, 60 days after 28/29 February f each year). Where the emplyer has ceased t be an emplyer in relatin t the emplyee cncerned but has nt ceased t be an emplyer in relatin t ther emplyees, within 14 days f the date n which the emplyer has s ceased. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 12

16 Where the said emplyer has ceased t be an emplyer (in respect f all the emplyees), within seven days n which the emplyer has s ceased. Where the remuneratin payable by the emplyer t the emplyee is belw the tax threshld as defined in paragraph 1 f the Furth Schedule t the Act, the emplyees tax will nt be deducted r withheld frm such remuneratin. The emplyer will then be required t issue an IT 3(a) certificate instead f an IRP5 certificate. In bth the IRP5 and IT 3(a) certificates, the remuneratin must be cded The prvisins f sectin 23(m) f the Act will apply accrdingly Independent cntractrs that are deemed nt t be independent As stated abve, an artist/mdel/crew wh is a cmmn law independent cntractr deemed nt t be independent fr the purpses f the Furth Schedule t the Act, is subject t emplyees tax deductin. Accrdingly the prductin cmpany must furnish such a persn with an IRP5 certificate. The prductin cmpany will cease t be an emplyer t such artist/mdel/crew nce the services have been rendered. Accrdingly the prductin cmpany must furnish the IRP5 certificate t the artist/mdel/crew within 14 days f the date n which the prductin cmpany ceased t be an emplyer in respect f the artist/mdel/crew cncerned. Hwever, SARS has a discretin, in terms f paragraph 13(3) f the Furth Schedule t the Act, t direct therwise (that is, deem the emplyer nt t have ceased t be an emplyer) in respect f casual emplyees wh are likely t be re-emplyed frm time-t-time by such emplyer. Based n the abve, SARS will exercise its discretin t deem the prductin cmpany nt t have ceased t be an emplyer t the artist/mdel/crew after the services have been rendered. The prductin cmpany may then issue ne IRP5 certificate in respect f an artist/mdel/crew instead f issuing an IRP5 certificate within 14 days every time after which the services have been rendered. This will reduce the administrative burden f issuing mre than ne IRP5 certificate where an artist/mdel/crew has been used mre than nce by the prductin cmpany. As stated in paragraph abve, the remuneratin must be cded 3616 n the IRP5 certificate and accrdingly the prvisins f sectin 23(m) f the Act will nt apply. The agent, as part f his r her administrative services ffered t the artist/mdel/crew, may cllect these IRP5 certificates frm varius prductin cmpanies n behalf f the artist/mdel/crew. Althugh prductin cmpanies (r ther principals) are liable t deduct emplyees tax and issue IRP5 certificates (and all ther emplyer-related bligatins under the Furth Schedule t the Act) in respect f these artists/mdels/crew, SARS has n bjectin shuld an agent and a prductin cmpany (r ther principal) agree that the agent deducts emplyees tax and fulfils the related administrative duties (fr example issue IRP5 certificates) n behalf f the prductin cmpany. Such an arrangement must, hwever, include all payrll deductins and the agent must, therefre, als deduct the skills develpment levy (please see paragraph 5 belw n the payment f skills develpment levy). The arrangement must als ensure that emplyees tax is withheld and paid t SARS under the name and emplyees tax number f the prductin cmpany, and that IRP5 certificates are als issued under the name and emplyees tax number f the prductin cmpany. The agent must als ensure that the prductin cmpany is able t cmplete its mnthly and annual emplyees tax declaratins, returns and recnciliatins. Despite the afrementined arrangement, any nn-cmpliance with the requirements f the Furth Schedule t the Act remains a failure f the prductin cmpany fr which the prductin cmpany remains respnsible twards SARS. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 13

17 3.5.3 Independent cntractrs that are deemed t be independent (i.e. thse that remain independent even fr PAYE purpses) As stated abve, an independent cntractr wh is deemed t be carrying n an independent trade even fr the purpses f the Furth Schedule t the Act is nt subject t emplyees tax deductin. Accrdingly the prductin cmpany will nt have an bligatin t issue any certificate (including an IT3(a) certificate) t such crew because the amunt payable t him r her is nt remuneratin as defined in the Furth Schedule t the Act. Hwever, the prductin cmpany may issue an IT 3(a) certificate t such an independent cntractr if the cntractr requires such a certificate (this is, hwever, nt cmpulsry). The amunt must be cded 3616 n the IT 3(a) certificate, shuld such certificate be issued Persnal service cmpanies r trusts As stated abve, the persnal service cmpanies r trusts are subject t emplyees tax deductin. The prductin cmpany will, therefre, have t issue an IRP5 certificate t the persnal service cmpany r trust and the remuneratin must be cded 3601 n the IRP5 certificate. SARS s discretin, as utlined in paragraph abve, may als apply in respect f persnal service cmpanies r trusts where the prductin cmpany has used a persnal service cmpany r trust mre than nce. 4. LIMITATION OF EXPENSES Sectin 23(m) f the Act prhibits the deductin f certain expenditure, lsses and allwance that relate t any emplyment f, r ffice held by, any persn (ther than an agent r representative wh nrmally derives his r her incme in a frm f cmmissin). Please see Interpretatin Nte N. 13 issued by SARS fr a detailed discussin n this sectin. It is evident frm the abve that the limitatin f deductins in terms f sectin 23(m) f the Act is nly in respect f cmmn law emplyees (emplyment) r ffice hlders. As indicated abve, cmmn law independent cntractrs wh are subject t the statutry test are deemed nt t be independent fr purpses f the Furth Schedule t the Act nly. The effect f this is that these independent cntractrs retain their cmmn law independent cntractr status even thugh they are treated as if they are emplyees fr PAYE purpses. Sectin 23(m) f the Act is, therefre, nt applicable t cmmn law independent cntractrs wh are deemed nt t be independent fr purpses f the Furth Schedule t the Act. Accrdingly, the remuneratin payable t these cntractrs must be cded 3616 (and nt 3601) n the IRP5 certificate, as indicated in paragraph abve. 5. SKILLS DEVELOPMENT LEVY In terms f the Skills Develpment Levy Act, 1999, every emplyer must pay a skills develpment levy at a rate f 1% f the leviable amunt, as defined in paragraph 1 f the Furth Schedule t the Act, but excluding any amunt paid r payable t a labur brker r any persn r class r categry f persn whm the Minister f Finance by ntice in the Gazette declares t be an emplyee fr the purpses f the definitin f an emplyee in paragraph 1 f the Furth Schedule t the Act, t whm a certificate f exemptin has been issued; paid r payable t any persn by way f any pensin, superannuatin allwance r retiring allwance; GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 14

18 cntemplated in paragraphs (a), (d), (e) r (ea) f the definitin f grss incme in sectin 1 f the Act; payable t the a learner in terms f a cntract f emplyment cntemplated in sectin 18(3) f the Skills Develpment Act; deemed t be payable t the directr f a private cmpany in terms f paragraph 11C f the Furth Schedule t the Act. Based n the abve, therefre, any amunt f remuneratin nt excluded frm the definitin f leviable amunt (as utlined abve) will be subject t skills develpment levy. An amunt payable t a cmmn law independent cntractr deemed nt be independent fr the purpses f the Furth Schedule t the Act, is nt excluded frm the definitin f leviable amunt and accrdingly subject t skills develpment levy. Accrdingly, an amunt payable t any persn falling under categry A, B r Ci under paragraph 3.3.2, will nt be subject t skills develpment levy. Hwever, an amunt payable t any persn falling under categry Cii and D in paragraph 3.3.2, will be subject t skills develpment levy. 6. UNEMPLOYMENT INSURANCE CONTRIBUTIONS (UIF) The Unemplyment Insurance Cntributins Act, 2002 (the UIF Act) requires all emplyers and emplyees (excluding emplyers and emplyees which are exempt in terms f sectin 4 f the UIF Act) t make UIF cntributins. In terms f the UIF Act, emplyee means any natural persn wh receives any remuneratin r t whm any remuneratin accrues in respect f services rendered r t be rendered by that persn, but excludes an independent cntractr. The term independent cntractr abve refers t a cmmn law independent cntractr. As stated in paragraph 4 abve, cmmn law independent cntractrs deemed nt t be independent fr the purpses f the Furth Schedule t the Act, retain their cmmn law independent cntractr status even thugh they are treated as if they are emplyees fr PAYE purpses. Accrdingly, such independent cntractrs will nt be required t make UIF cntributins even thugh they are deemed nt t be independent fr PAYE purpses. Based n the abve, therefre, any persn falling under categry A, B r C under paragraph abve, will nt be required t make UIF cntributins. Hwever, any persn falling under categry D in paragraph will be required t make UIF cntributins. CONCLUSION It is trusted that this Guide will cntribute t greater clarity regarding the applicatin and interpretatin f the prvisins f the Act pertaining t emplyers respnsibility with regard t artists/mdels/crew in the film industry. Further infrmatin cncerning taxatin and abut SARS are available n the SARS website r can be btained frm SARS ffices. GUIDE ON THE EMPLOYERS TAX RESPONSIBILITIES WITH REGARD TO ARTISTS/MODELS/CREW IN THE FILM INDUSTRY 15