Taxing commission earners in South Africa
Commission is fully taxable remuneration and must have PAYE withheld like any salary. The complication is volatility: annualising a big commission month can over-deduct badly, and employees whose commission exceeds half their remuneration can claim business expenses that ordinary employees cannot.
Payroll Africa Editorial · SARS Payroll Compliance Team
The Payroll Africa editorial team is composed of registered tax practitioners, payroll administrators and BCEA specialists who maintain the SARS PAYE, UIF, SDL and ETI engines that power the platform. Every article is reviewed against the current SARS BRS and Basic Conditions of Employment Act before publication.
- SARS registered tax practitioners
- SAPA-affiliated payroll administrators
- BCEA and LRA compliance reviewers
Last updated 26 Aug 2026
Is commission taxed differently to salary?
No — commission is taxed at the same marginal rates using the same tables. It is not subject to a special flat rate, despite the persistent myth of a "commission tax rate".
What differs is timing. Commission is usually irregular, so the payroll must decide whether to annualise it (treat it as recurring) or add it as a once-off. Getting that decision wrong is what makes commission months feel over-taxed.
- Same brackets and rebates as salary
- Source code 3606 (commission) on the IRP5
- UIF and SDL apply to commission
- Include commission in the retirement funding definition if the fund rules say so
- Regular monthly commission is annualised; once-off payments are not
The 50% commission rule
An employee whose remuneration is more than 50% commission may deduct business expenses — travel, phone, home office, entertainment — against that income on assessment. Employees below the 50% mark cannot.
The test is applied on the year's remuneration as reflected on the IRP5, so accurate source coding matters: commission miscoded as salary can cost the employee the deduction entirely.
Fixed-percentage directives
Commission earners can apply to SARS for an IRP3(b) fixed-percentage directive. SARS reviews prior years and issues a single percentage to withhold on all remuneration, smoothing the swing between high and low months and avoiding a large assessment shortfall or refund.
The directive is valid for one tax year. The employer must apply the exact percentage while it is in force.
- Employee applies on eFiling; SARS issues IRP3(b)
- Employer applies the percentage to total remuneration
- Renew every tax year
- Record the directive number in payroll and on the IRP5
Practical payroll setup
Use a dedicated commission earning line rather than lumping it into basic salary, and mark it recurring or non-recurring so the annualisation is correct. Where the employee has a directive, set the fixed percentage on their profile.
Payroll Africa supports commission structures, targets and clawbacks, tags source code 3606 automatically, and honours fixed-percentage directives on the pay run and the IRP5.
Frequently asked questions
Related guides
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