PSP tax rates are the high, fixed PAYE rates that apply to amounts paid to a personal service provider. A PSP is a company or trust interposed to provide essentially one person's services, and the rates exist to stop that structure being used to avoid employees' tax.
What it means
Where SARS classifies a recipient as a PSP, the payer must withhold PAYE at a flat rate on the payment: 45% where the PSP is a trust, and the company rate (27%, previously 28%) where it is a company. These rates are deliberately steep so that routing employment income through an entity offers no tax saving over being taxed as an employee.
Where it fits in
The PSP classification sits in the nature-of-person setup and overrides the ordinary independent-contractor and employee treatment. The fixed rate is applied like a directive percentage - no tax tables, no rebates - to the full payment.
Key rules
- Flat PAYE rates on payments to a personal service provider.
- 45% where the PSP is a trust; the company rate (27%/28%) where it is a company.
- Applied without tax tables or rebates, like a fixed-percentage directive.
- Exist to neutralise the tax benefit of interposing an entity for one person's services.
