Engaging a contractor in South Africa is simple when the person runs their own business and risky when they work for you like staff. A contractor invoices in rand or dollars, holds a SARS tax number, pays their own income tax as a provisional taxpayer, and you pay gross. The legal risk is classification: section 200A of the Labour Relations Act presumes employment on any one of seven factors for anyone earning up to R269,600.90 a year. This guide covers the contractor’s tax, personal service providers, reclassification, the contract and the payer’s paperwork. The payment side is on our South Africa payouts page. It is general information, not legal advice.
Individual or company
Individual. A sole proprietor invoices in their own name and files under their own SARS tax number. SARS excludes payments to independent contractors who are natural persons from “remuneration”, so a South African payer does not deduct employees’ tax from them (SARS Interpretation Note 35, checked 2026-10-26).
Company. A contractor working through a (Pty) Ltd is a personal service provider if the owner renders the service personally and the company does not employ three or more full-time staff who are not owners or connected persons. In that case the exclusion does not apply, and the entity counts as an employee for employees’ tax (same note). Those rules bind the payer, so if you pay from abroad with no South African presence, ask a South African tax adviser before assuming they miss you.
The contractor’s tax and VAT
Income tax. For the 2026/27 year the scale runs from 18% up to R245,100 to 45% above R1,878,600, with a R17,820 primary rebate and a R99,000 threshold under age 65 (SARS, checked 2026-10-26).
Provisional tax. A self-employed person is a provisional taxpayer and pays in two instalments, the first by 31 August and the second by the last business day of February (SARS, checked 2026-10-26). A contractor who quotes a net rate carries all of it, so agree the fee gross or net in writing.
VAT. Registration is compulsory above R2.3 million of taxable supplies a year, raised from R1 million from 1 April 2026, and voluntary from R120,000 (SARS, checked 2026-10-26). A supply of services to a non-resident is generally zero-rated under section 11(2)(l), except where the recipient or another person is in South Africa when the service is rendered (SARS Interpretation Note 31, checked 2026-10-26).
Reclassification risk
Section 200A presumes, until the contrary is proved and regardless of the form of the contract, that a person is an employee if any one or more of seven factors is present:
- the manner in which they work is subject to your control or direction;
- their hours are subject to your control or direction;
- they form part of your organisation;
- they have worked for you for an average of at least 40 hours a month over the last three months;
- they are economically dependent on you;
- you provide their tools of trade or equipment;
- they work for you only.
The presumption does not apply to a person earning above the BCEA threshold, R269,600.90 a year from 1 May 2026 (LRA s 200A, RSM, checked 2026-10-26). Below it, a full-time contractor with one client already shows three factors. If a contractor is reclassified, dismissal for operational requirements brings severance of at least one week’s remuneration for each completed year of service (Fasken, checked 2026-10-26). See contractor misclassification. If the role is a job, hire through an EOR.
What to put in the contract
- A written services agreement scoped to deliverables, with the fee, currency, receiving account and who bears transfer charges.
- An invoice for every payment, with the contractor’s tax number, matched to the payment reference.
- IP assignment in writing. An assignment of copyright has no effect unless it is in writing and signed by or on behalf of the assignor (Copyright Act s 22(3), checked 2026-10-26). Put it in the agreement and have it signed.
- Independence markers: the contractor’s own equipment and schedule, the right to work for other clients, and a fee tied to deliverables. These answer the s 200A factors on control, tools and a single client.
Taxes and paperwork
The contractor’s side. Hold a SARS tax number, invoice for each payment, pay provisional tax twice a year and file the annual return.
The client’s side. Pay gross against the invoice. US payers collect a W-8BEN from an individual and file no 1099: pay for work done in South Africa is foreign-source income (irs.gov, checked 2026-10-26), and South Africa is on the IRS treaty list (irs.gov, checked 2026-10-26).
How to pay contractors in South Africa
Wise delivers rand to individual and business bank accounts in South Africa, usually 0 to 1 working days after conversion (wise.com, checked 2026-10-26). A SWIFT wire is the alternative, and some platforms pay ZAR directly. Exchange control applies: residents may hold a foreign currency account for legitimate foreign earned income, but foreign currency not exempted must be offered for sale within 30 days (SARB, checked 2026-10-26). Rails, costs and platforms are compared on our South Africa payouts page.
Contractor of Record in South Africa
A Contractor of Record is the contracting party for the contractor and reduces reclassification risk; it does not remove it. In South Africa the work still has to look independent: your control, the contractor’s hours and tools, and a single client are the s 200A factors a claimant would use. A COR can keep contracts consistent across a team and flag engagements that look like dependency. Read the liability clause in the contract rather than the product name. Where the role is a job, with your hours, your tools and core work, hire through an EOR instead. Compare providers in our COR rating.