Salaries Tax - Disguised employments
Continued from prior page.
It is anticipated that Section 9A affects many business arrangements
that are done without a tax-avoidance purpose. To restrict its
effect, the law provides that a business arrangement satisfying all
the following conditions falls outside its scope.
(a) the agreement does not provides for remuneration to include
annual leave, passage allowance, sick leave, pension entitlements,
medical payments or accommodation, etc;
(b) in the case of the agreement requiring any services to be
carried out personally by the relevant individual, that individual
also carries out similar services for other persons;
(c) the performance of the relevant individual is not subject to
“employer-type” control or supervision by the relevant person;
(d) the remuneration is not paid on a basis commonly used under a
contract of employment;
(e) the relevant person does not have the right to terminate the
services in a manner commonly provided for under a contract of
(f) the relevant individual is not held out to the public to be an
officer or employee of the relevant person.
Besides, the Commissioner of Inland Revenue may in his discretion
exclude a business arrangement from Section 9A if he is satisfied
that at all relevant times the carrying out of the services under
the agreement is not substantially in the nature of an office or
employment. This provides an escape route for those arrangements
failing to meet all the above conditions.
Section 9A is invoked
when tax avoidance scheme is suspected. In other cases, the IRD will
look at such factors as master and servant relationship, control,
organization, economic risk... etc. to determine the
question of contract of service versus contract for service. Press Employed versus
Self-employed for details.
required by IRD on service company arrangements under Section 9A