CXC_________________

CONTRACTING "Options"

OPTIONS,
what suits you best?

CHOOSING YOUR OPTIONS

We suggest that you discuss your own personal situation and the options with us prior to accepting an offer from a prospective employer/client. You should obtain a copy of your contract terms and conditions from the client/agency, and inform them that you will be working through CXC Management CC South Africa associated companies.

It is essential that the contract is drawn up between the client/agency and CXC Management CC South Africa and be signed by our directors to enable us to invoice on your behalf.

Before signing any such contract we will peruse 'same' to ensure that all conditions and terms are acceptable and not too onerous plus legal and insurance requirements are met. You will be required to sign a contract with the nominated cXc company, as the service provider, to signify your acceptance of its terms and the terms of the agreement with the client/agency.

Option 1 - Employee

Utilising option 1, the contractor becomes an employee of the agency and tax is deducted by the employer. This is not a very tax efficient way to work as the maximum that a PAYE taxpayer can claim in costs and expenses is limited to allowances reflected on IRP5 (without serious proof of payment and record keeping).

Option 2 -Set Up Own Company / CC

Utilising Option 2, tax is not deducted at source BUT If you have less than 3 employees, or work for only one organisation for an extended period, the SARS may rule that you are an employee and demand that the company pay them the tax owing on the total amount billed.

(Most contractors cannot meet the complex criteria, which is why they choose to work through a composite company). Further, the application of Tax ruling removes the incentive of using your own company as a vehicle to work through, although you may wish to use such a company as an investment company.

Advantages: Paid gross of tax, hence more disposable income, Increased level of deductions claimable eg: home office, telephones, postage, travel, air, car hire, parking, road tolls, equipment, self-education, books, stationery.

Disadvantages: Cost of establishment, annual administration costs and time, running costs are incurred even when not trading, annual returns, Workers compensation, Public liability insurance, Compliance to regulations, Onerous directors liabilities, Unpaid holidays.

Option 3 - Composite Company

A composite company is a legal entity in its own right. It can own assets and incur liabilities in its name and the shareholders are only liable to the value of their paid-up share capital. In certain circumstances directors can be held personally liable for the debts of the company and amendments to the Corporations law continually increases the responsibility of directors in all its financial dealings. All the expenses in Option 2 are claimable under this structure.

A 'composite company' is in fact a management company established to deal with the affairs of independent contractors in the most efficient manner, completely within the legal boundaries of South African law, and meets all the compliance and administration requirements.

Each contractor becomes a member, but is not a director. All contracts are signed by the directors of the company, not the contractors or shareholders.

All of the advantages and few of the disadvantages of your own company structure apply plus a range of additional advantages:

Statutory records and ledgers are prepared for you
Public liability insurance and workers compensation are covered
Starts and stops in employment do not incur costs
Your company is managed by accountants
Tax is legally minimised in every case

Types of Composite Companies

Compliance with all the statutory regulations is a complex task. CXC provides several types of incorporated composite company structures which the tax office is unable to dispute. Overseas contractors may be able to benefit from one of these permutations, but must be aware that there may still be some tax implications in their primary country of tax residency when working overseas.

It should be noted that in most countries you are liable for tax from day one (1) if your stay exceeds 183 days.

CXC Management CC South Africa is an entirely independent free-standing business, with its own office suite in 41 Cypress Street, Northmead, Ext 4, Benoni, and registered companies in:

Australia: (Australian and overseas contractors working in Australia): Salaries are paid, subject to PAYE at source, but eligible expenditure is claimable throughout the year, and dividends can be paid to shareholders after deduction of imputation tax.

USA: (USA citizens who have a tax free threshold, or citizens of other countries who wish to be paid in US Dollars): Contractors are treated as employees. Since these companies are not required to deduct and remit Australian tax at source, the contractor is responsible for, and MUST set aside and pay Australian and other foreign country taxes as and when they fall due. CXC are able to assist in planning for the retention of these taxes if so required.

United Kingdom: (UK and overseas contractors working in UK):
Contractors are treated as employees and partners, receiving a salary and dividends from
U.K. registered companies.

Isle of Man: (UK contractors working outside of the UK):
Assist in tax planning and to reduce the cost of National Health and Social Security whilst working overseas.

South Africa: (South African contractors working in SAfrica)
Assist in tax planning and overseas opportunities.

There are a variety of ways that CXC can accommodate your individual situation.

How the service works and what you pay

CXC Management CC South Africa options will include:

1. Provision of a legal company structure whilst you are contracting or undertaking
temporary work.

2. Invoicing the client on your behalf, and on receipt of payment from the client,
forwarding payment to you.

3. The "Options" available;

a). A PAYE scheme can be established to ensure that sufficient tax, Medical Aid Levy, and Policy charges are deducted from you,
OR

b). A company can be established on your behalf at a flat rate,
OR

c). You may become a member of one of CXC Management CC South Africa associated companies, and receive tax efficient dividend distributions.
OR

d). A combination of the above

4. All deductions made from you, or from your company, shall be remitted to the relevant authorities on a monthly basis.

5. Provision of a monthly statement of income and expenditure.

6. Guidance on professional Indemnity insurance, disability insurance or retirement benefits at no cost.

7. Assistance and advice in keeping accurate records to ensure that legitimate business expenses can be claimed as a tax deduction.

8. Processing and lodgement of your company annual tax return.

9. Minimising your paperwork to monthly time sheets/commission or earnings statements
and monthly expense details.

10. Advice on tax, insurance and finance issues.

11. Flexibility to change your jobs, contracts and/or options at any stage.

12. Should you leave the company, no termination fees apply if we receive one month's notice in writing. This is to enable us to complete all necessary documentation.

Conditions/fees & Receiving Payments