BG454 Employer Duties Pescribed by SARS
Taxco Business Guide
The objective of this business guide is to assist employers in determining how to best fulfil their duties and responsibilities as regards to being an employer, to reduce their employee tax risks and to explain how Taxco can assist with this core part of managing business.
Many employers dot realise that they may be liable for a fine or imprisonment for a period up to twelve months, or both, should they not comply with their duties a an employer in terms of the Income Tax act.
Taxable remuneration paid to employees is a major source of income for the South African Revenue Services (SARS) in terms of Employees tax, Skills development levies and Unemployment insurance fund contributions and many obligations are placed on the employer to collect, administrate and pay these monies over to SARS in terms of the Fourth and Seventh Schedule of the Income Tax Act.
An employer must register within 14 days with SARS from the date he employed persons who are liable for taxation (EMP101 Form). The employer must deduct taxation from employees receiving remuneration in accordance with the prescribed tax tables and the taxation deducted must be paid over to SARS within 7 days from the end of a month on form EMP201.
Branches of a business may register as separate employers.
An agreement between an employer and employee not to deduct tax is null and void. The employer is held liable for taxation not deducted.
Non repetitive income, e.g. Overtime, bonuses and quarterly commissions are generally treated as normal remuneration and annual payments and lump sums not exempted should be treated in terms of the SITE rules.
In specific circumstances a directive may be obtained from SARS to:
- Deduct a specific amount of tax from an employee
- Stop deductions or not to deduct tax from an employee
- Obtain a prescribed rate of tax to deduct from an employee
Normally a directive is obtained for lump sums from pension, provident and retirement annuity funds or where the employee incurred expenses to earn commission income.
SARS may estimate a reasonable amount of taxation not deducted from employees and issue such an assessment.
Calculation of PAYE, UIF and SDL
Employees' tax must be calculated on the balance of remuneration
(remuneration for employees' tax purposes less any allowable deductions)
with reference to the prescribed deduction tax tables.
The UIF contribution is calculated on the remuneration for UIF purposes. This amount is generally the remuneration for employees for tax purposes, but excludes any amount paid or payable to an employee for pension, lump sums or voluntary awards.
The SDL leviable amount is to a large extent based on the employees' tax calculation, the remuneration on which the levy will be calculated is
determined with reference to the balance of remuneration for employees' tax purposes. Although remuneration paid to an employee may be below the tax threshold for employees' tax purposes, the employer is still liable for payment of SDL on such remuneration.
Penalties and interest on late payments
10% on late payments of taxation deducted. Interest at the prescribed rate on such late payments.
Where the employer fails to pay the relevant amount with intent to evade his obligation, the employer may in terms of Paragraph 6(2A) of the 4th Schedule, Section 12(3) of the SDL Act and Section 13(2) of the UIC Act be liable to pay a penalty not exceeding an amount equal to twice the amount of employees' tax, SDL or UIF contributions which the employer so failed to pay.
Any employer not complying with his duties as an employer may be liable for a fine or imprisonment for a period up to twelve months, or both.
An employer must keep records of remuneration paid or payable to each employee, daily, weekly or monthly (A Salary or Wage Register). The records must include taxation deducted or held back and must be kept for a period of 5 years. This register must contain personal particulars as well as financial details of each employee. The records may be in electronic format.
The right to request information
SARS has the right to request complete information about the employee, his remuneration or deductions of employees’ tax and to be presented with complete records, books and accounts as well as the right to question the employer about such remuneration or deductions.
Half yearly and annual returns
Within 60 days from the end of each tax year an employer must issue an IRP5 to SARS for each employee indicating
- The name and address of the employee
- The total remuneration paid to the employee
- The total amount of taxable fringe benefits given to the employee
- The total amount of taxation deducted from the employee
An half yearly and annual reconciliation (Form IRP501) must also be submitted declaring that all taxable benefits for the period are included on the
employee tax certificates, reconciling total tax collected from employees and paid over to SARS.
Employee tax certificates - IRP5 and IRP3(a)
An employer must issue each employee and former employee with a tax certificate indicating the amount of remuneration paid or payable to the employee for the tax year with the amount of taxation deducted from such income. If no taxation was deducted an IT3(a) tax certificate must be given to such employee.
How can Taxco help?
As can be seen from the above, employers can easily be in serious trouble if they do not know the correct procedures or if the rules are not followed timeously. Our Payroll department can assist you in one of the following ways that may suit your specific needs and circumstances:
Taxco offers a complete Payroll solution insofar as you supply us with the employee’s permanent data at take-on and thereafter their weekly, forth-nightly or monthly pay or just changes thereto. Information can be faxed or emailed as you may choose.
Our highly skilled experienced professionals utilise specialised payroll software that knows all the rules and we then supply you by email or fax with all the reports you may ever need, including, payslips, departmental cost-pay registers, coinage, statistical data, staff loans, leave, specific deductions and tax reports, including the EMP201, all the IRP501 Reconciliations and monthly and bi-annual electronic submission on your behalf via SARS-efiling.
This solution gives you more time for your real business and takes all the hassle out of this complicated and demanding administrative function, while keeping you informed and in control of your employee cost.
In cases where you may wish to run your payroll in-house, we assess your specific needs and circumstances, we can then as registered added value resellers of various payroll software assist you with the purchasing of the correct payroll software that will deliver what you require, we supply full training and support and can further assist you with the initial take-on, which can in many cases be the most crucial part of getting things right.
For more details, Contact Us now to discuss how our cost effective, convenient and specially customised payroll service can assist you in staying punctually compliant with all of the SARS regulations. Confidentiality guaranteed.
This Guide is subject to the Terms and Conditions of Use of Taxco Services and their Website.