© Warona Lekoko, 2024
Employee’s Tax Fourth Schedule
Background:
▪ Employees tax/PAYE = prepayment of employee’s (EE) normal tax
▪ Employer (ER) must calculate, withhold form EEs renumeration & pay it over to SARS on a monthly basis
▪ Deducted after “Normal tax liability for the year”
▪ NB: PAYE IS NOT a separate or additional tax, but rather advances/pre-payments of normal tax on remuneration
▪ If EE has >1 ER, each ER will make separate PAYE calc on remuneration they pay to EE
▪ To reduce the amount payable assessment, with written request by the EE, ER can withhold a greater # of PAYE than required – par 2(2)
▪ PAYE on variable remuneration deducted on date of payment – par 2(1B)
▪ Payment of PAYE accompanied by SDL (ER contribution) & UIF (ER & EE contributions) – remitted on EMP201
▪ PAYE withheld on monthly basis when an ER (resident) or representative ER (non-resident) pays/becomes liable to pay remuneration to an EE– par 2(1)
▪ ER must pay it over to SARS within 7 days from the end month from which it was withheld, accompanied w/ EMP201 (if 7th day = Sat, Sun or public holiday,
then last business day before that day)
▪ ER must submit recon declarations, EMP501 – interim: 13/09/20 – 31/10/20, annual period: 1/4/21 – 31/5/21
▪ At year-end, once drafted, total PAYE withheld from specific EEs remuneration can be identified & quantified – by 31 May annually, ER must submit employee’s
tax certificate = IRP5
Par 30: if ER knowingly applies any amount withheld for reasons other than to pay it over to SARS, or wilfully/negligently fails to deliver IRP5s to
current/former EEs, they will be guilty of an offence & fined or imprisoned for period not exceeding 2 yrs
Tax Practitioner Connect Issue 21: non-compliance w/ PAYE obligations costly & offence punishable by fine/imprisonment (≤ 2 yrs):
- Non-compliance: willing/neglectful failure to submit EMP201/ 501 or submit IRP5 or furnish to EE (/former), or deducting PAYE & applying for other reasons
- Penalties (PAYE, SDL, UIF) – late payment: 10% on outstanding amount + interest (charged daily) from due date to the date which PMT is made
Employee’s Employer Employee
Tax
O
Remuneration
EMPLOYEE’S TAX FRAMEWORK
/ Lumpsum
l
“Remuneration” (per month) XXX
Less: Par 2(4) Deductions:
(a): EE P/Pr fund contribution ltd s11F (xx)
(b): EE RAF fund contribution … (xx)
(bA): ER RAF fund contribution … (xx)
YYY
(f): ER s18A donation ltd 5% of YYY (xx)
Equals: Balance of remuneration XXX
12 Annual equivalent (excl. annual payment) XXXX
Plus: Annual payment xx
Equals: XXXX
Tax as per tax tables XXX / XXX
Less: Rebates (s6) (xx)
Less: Medical tax credit (s6A and s6B(3)(a)(i)) (xx)
Equals: Tax liability on taxable income (excl. AP) /(incl..AP) ZZZ / ZZZ
Tax on annual payment (ZZZ – ZZZ) xxx
Plus: Tax per month (ZZZ 12) xxx
Equal: EMPLOYEE’S TAX FOR THE MONTH XXXX
, © Warona Lekoko, 2024
Remuneration:
Salary, leave pay, wage, overtime pay, bonus, gratuity, commission,
EXCLUDES:
(ii): Amounts to independent contractors for SR
(iii): Pension for aged, blind or disabled persons
(vi): Wholly reimbursement of expenditure actually incurred
fee, emolument, pension, superannuation allowance, retiring allowance (viii): Annuities i.t.o divorce orders
or stipend
whether in cash or otherwise - Remuneration = amount that is ‘income’ as defined
whether or not in respect of services rendered
- # which aren’t ‘income’ won’t be subject to PAYE, i.e., exempt income:
Capital portion of ‘annuity amount’
INCLUDES: Special uniforms
(a): Gross income definition, par…: Transfer costs
▪ (a): Annuities Foreign employment income
▪ (c): Amounts for services rendered (SR) Bursaries and scholarships
▪ (cA), (cB): Restraint of trade payments received by natural persons,
LB (w/o EC) or PSP … but remember, for example, a bursary (relative, not disabled, NQF 6) of R100 000
▪ (d): Loss of office compensation will only qualify for an exemption of R60 000. The remaining R40 000 will be
▪ (e), (eA): RLB and RLWB
taxable and must be included in remuneration. However, the taxable benefit of
▪ (f): Commutation of amounts
bursary & scholarships = annual payments for PAYE purposes.
(b): Cash equivalent of fringe benefits (other than RoUMV)
(bA): Allowance/advance included in taxable income as per s8(1) (other than Taxable benefits granted by:
TA, reimbursed allowances, allowances granted to public office holder) - Associated institution = deemed to be granted ER
- ER to EE’s relative/any other person under any contract of employment or
(bA)(ii): Subsistence allowance where EE, before last day of following month, agreement w/ ER = deemed granted to the EE & they will be taxed
does NOT either:
Spend a night away from usual place of residence, or - Directors of companies – included in EE definition, par (a) … PAYE withheld
Pay allowance back - Director’s fee of non-execs ≠ remuneration… not subject PAYE
… deemed payable in following month for an amount for services rendered
(c): 50% of public officer allowance - The extent of remuneration received for SR outside South Africa is exempt
only up to R1 250 000 (s10(1)(o)(ii))
(cA): 80% of fixed TA (20% if ER satisfied that ≥ 80% for bus purposes) - ER isn’t consequentially waived from having to withheld PAYE but they may
(cB): 80% of RoUMV – taxable benefit before par 7(7) or (8) adjustments elect to not deduct if they’re satisfied that the exemption will apply to the EE
made on assessment (20% if ER satisfied that ≥80% for bus purposes) (and UIF & SDL*)
- R1.25 mil threshold = accumulated monthly (NOT averaged over YOA) –
(cA): 100% of excess reimbursive travel allowances income exceeding the threshold subject tax
(Rate paid by ER – Simplified Rate) Business km travelled - See the example in SILKE to see how to apply the exemption
Employer:
Definition par 1:
EMPLOYEE:
Natural person who receives/accrues remuneration
l Definition par 1:
Person that pays/liable to pay remuneration to any person
Includes persons acting in fiduciary capacity/capacity as trustee of insolvent
estate/executor or administrator of fund…
Person who receives/accrues remuneration for SR to/on behalf of LB
LB
Person/class/category of people MoF declares to be EE in Gov Gazette Person responsible for PMT of remuneration to persons under the
PSP provisions of any law/out of public or Parliament provincial council
Director of private company voted funds
O
Employee’s Tax:
ER (resident) or representative ER (non-resident) liable to pay remuneration to
any EE must withhold & pay to SARS over within 7 days after end of the
month in which deducted - The ER can only take into account information available to them in the
calculation of PAYE. The ‘27,5% of taxable income (including CGT)’ &
PAYE on variable remuneration must only be withheld on the date on which ‘taxable income (excluding CGT)’ limits are thus excluded as the ER
lacks the relevant information calculate them.
the amount is paid to the employee (par 2(1B)) – includes:
- For PAYE purposes, balance of unclaimed contributions won’t be
overtime pay, bonus or commission
accounted for – ONLY current contributions
leave pay
reimbursive travel, fixed travel, night shift, standby allowance
reimbursement of proven expenditure incurred by EE on ER’s
instruction Annual payment
▪ Annual payment (AP) = amount of net remuneration paid in accordance w/
The following is also subject to PAYE: the EE’s conditions of service/ER’s practice, as lump sum/calculated w/o
RLWB (par 2(1)(b) of 2nd Schedule) reference to a period
Remuneration paid to an employee who is married but the income is ▪ If remuneration includes an annual payment (AP), to determine the PAYE
deemed income of the spouse (s7(2)) to be withheld for that month, a calculation must be made for annual
equivalent including the AP and one excluding the AP
▪ The AP is already an annual amount and thus needn’t be converted to an
Deductions – par 2(4)(a) – (f):
annual equivalent
P/Pr fund contribution by EE, limited to s11F ▪ Examples: bonus, leave pay, merit awards
RAF contribution by EE, … (at option of ER) ▪ Fringe benefit received once ≠ AP – must be included in remuneration
RAF contribution by ER (fringe benefit), …
ER s18A donation on EE’s behalf, limited to 5% of balance of remuneration Medical tax credits – par 9(6):
after deducting the aforementioned Amount for s6A may be deducted if:
ER contributes to medical aid scheme (fringe benefit), or
For PAYE purposes s11F will be calculated as follows: EE makes contributes but has furnished ER w/ proof of payment
Limited to the lesser of:
①29 167 = 350 000 12
Amount for s6B may only be deducted where the EE ≥ 65 years if:
ER makes payment of medical expenses (fringe benefit), or
②27.5% of remuneration EE makes payment but has furnished ER w/ proof of payment (at the
option of ER)
- If employed for period less than 12 months, for PAYE purposes,
apportion ① for applicable months. Unused portion will be accounted s6B = 33.3% [Total contributions paid – (3 x s6A)]
for on assessment.
Employee’s Tax Fourth Schedule
Background:
▪ Employees tax/PAYE = prepayment of employee’s (EE) normal tax
▪ Employer (ER) must calculate, withhold form EEs renumeration & pay it over to SARS on a monthly basis
▪ Deducted after “Normal tax liability for the year”
▪ NB: PAYE IS NOT a separate or additional tax, but rather advances/pre-payments of normal tax on remuneration
▪ If EE has >1 ER, each ER will make separate PAYE calc on remuneration they pay to EE
▪ To reduce the amount payable assessment, with written request by the EE, ER can withhold a greater # of PAYE than required – par 2(2)
▪ PAYE on variable remuneration deducted on date of payment – par 2(1B)
▪ Payment of PAYE accompanied by SDL (ER contribution) & UIF (ER & EE contributions) – remitted on EMP201
▪ PAYE withheld on monthly basis when an ER (resident) or representative ER (non-resident) pays/becomes liable to pay remuneration to an EE– par 2(1)
▪ ER must pay it over to SARS within 7 days from the end month from which it was withheld, accompanied w/ EMP201 (if 7th day = Sat, Sun or public holiday,
then last business day before that day)
▪ ER must submit recon declarations, EMP501 – interim: 13/09/20 – 31/10/20, annual period: 1/4/21 – 31/5/21
▪ At year-end, once drafted, total PAYE withheld from specific EEs remuneration can be identified & quantified – by 31 May annually, ER must submit employee’s
tax certificate = IRP5
Par 30: if ER knowingly applies any amount withheld for reasons other than to pay it over to SARS, or wilfully/negligently fails to deliver IRP5s to
current/former EEs, they will be guilty of an offence & fined or imprisoned for period not exceeding 2 yrs
Tax Practitioner Connect Issue 21: non-compliance w/ PAYE obligations costly & offence punishable by fine/imprisonment (≤ 2 yrs):
- Non-compliance: willing/neglectful failure to submit EMP201/ 501 or submit IRP5 or furnish to EE (/former), or deducting PAYE & applying for other reasons
- Penalties (PAYE, SDL, UIF) – late payment: 10% on outstanding amount + interest (charged daily) from due date to the date which PMT is made
Employee’s Employer Employee
Tax
O
Remuneration
EMPLOYEE’S TAX FRAMEWORK
/ Lumpsum
l
“Remuneration” (per month) XXX
Less: Par 2(4) Deductions:
(a): EE P/Pr fund contribution ltd s11F (xx)
(b): EE RAF fund contribution … (xx)
(bA): ER RAF fund contribution … (xx)
YYY
(f): ER s18A donation ltd 5% of YYY (xx)
Equals: Balance of remuneration XXX
12 Annual equivalent (excl. annual payment) XXXX
Plus: Annual payment xx
Equals: XXXX
Tax as per tax tables XXX / XXX
Less: Rebates (s6) (xx)
Less: Medical tax credit (s6A and s6B(3)(a)(i)) (xx)
Equals: Tax liability on taxable income (excl. AP) /(incl..AP) ZZZ / ZZZ
Tax on annual payment (ZZZ – ZZZ) xxx
Plus: Tax per month (ZZZ 12) xxx
Equal: EMPLOYEE’S TAX FOR THE MONTH XXXX
, © Warona Lekoko, 2024
Remuneration:
Salary, leave pay, wage, overtime pay, bonus, gratuity, commission,
EXCLUDES:
(ii): Amounts to independent contractors for SR
(iii): Pension for aged, blind or disabled persons
(vi): Wholly reimbursement of expenditure actually incurred
fee, emolument, pension, superannuation allowance, retiring allowance (viii): Annuities i.t.o divorce orders
or stipend
whether in cash or otherwise - Remuneration = amount that is ‘income’ as defined
whether or not in respect of services rendered
- # which aren’t ‘income’ won’t be subject to PAYE, i.e., exempt income:
Capital portion of ‘annuity amount’
INCLUDES: Special uniforms
(a): Gross income definition, par…: Transfer costs
▪ (a): Annuities Foreign employment income
▪ (c): Amounts for services rendered (SR) Bursaries and scholarships
▪ (cA), (cB): Restraint of trade payments received by natural persons,
LB (w/o EC) or PSP … but remember, for example, a bursary (relative, not disabled, NQF 6) of R100 000
▪ (d): Loss of office compensation will only qualify for an exemption of R60 000. The remaining R40 000 will be
▪ (e), (eA): RLB and RLWB
taxable and must be included in remuneration. However, the taxable benefit of
▪ (f): Commutation of amounts
bursary & scholarships = annual payments for PAYE purposes.
(b): Cash equivalent of fringe benefits (other than RoUMV)
(bA): Allowance/advance included in taxable income as per s8(1) (other than Taxable benefits granted by:
TA, reimbursed allowances, allowances granted to public office holder) - Associated institution = deemed to be granted ER
- ER to EE’s relative/any other person under any contract of employment or
(bA)(ii): Subsistence allowance where EE, before last day of following month, agreement w/ ER = deemed granted to the EE & they will be taxed
does NOT either:
Spend a night away from usual place of residence, or - Directors of companies – included in EE definition, par (a) … PAYE withheld
Pay allowance back - Director’s fee of non-execs ≠ remuneration… not subject PAYE
… deemed payable in following month for an amount for services rendered
(c): 50% of public officer allowance - The extent of remuneration received for SR outside South Africa is exempt
only up to R1 250 000 (s10(1)(o)(ii))
(cA): 80% of fixed TA (20% if ER satisfied that ≥ 80% for bus purposes) - ER isn’t consequentially waived from having to withheld PAYE but they may
(cB): 80% of RoUMV – taxable benefit before par 7(7) or (8) adjustments elect to not deduct if they’re satisfied that the exemption will apply to the EE
made on assessment (20% if ER satisfied that ≥80% for bus purposes) (and UIF & SDL*)
- R1.25 mil threshold = accumulated monthly (NOT averaged over YOA) –
(cA): 100% of excess reimbursive travel allowances income exceeding the threshold subject tax
(Rate paid by ER – Simplified Rate) Business km travelled - See the example in SILKE to see how to apply the exemption
Employer:
Definition par 1:
EMPLOYEE:
Natural person who receives/accrues remuneration
l Definition par 1:
Person that pays/liable to pay remuneration to any person
Includes persons acting in fiduciary capacity/capacity as trustee of insolvent
estate/executor or administrator of fund…
Person who receives/accrues remuneration for SR to/on behalf of LB
LB
Person/class/category of people MoF declares to be EE in Gov Gazette Person responsible for PMT of remuneration to persons under the
PSP provisions of any law/out of public or Parliament provincial council
Director of private company voted funds
O
Employee’s Tax:
ER (resident) or representative ER (non-resident) liable to pay remuneration to
any EE must withhold & pay to SARS over within 7 days after end of the
month in which deducted - The ER can only take into account information available to them in the
calculation of PAYE. The ‘27,5% of taxable income (including CGT)’ &
PAYE on variable remuneration must only be withheld on the date on which ‘taxable income (excluding CGT)’ limits are thus excluded as the ER
lacks the relevant information calculate them.
the amount is paid to the employee (par 2(1B)) – includes:
- For PAYE purposes, balance of unclaimed contributions won’t be
overtime pay, bonus or commission
accounted for – ONLY current contributions
leave pay
reimbursive travel, fixed travel, night shift, standby allowance
reimbursement of proven expenditure incurred by EE on ER’s
instruction Annual payment
▪ Annual payment (AP) = amount of net remuneration paid in accordance w/
The following is also subject to PAYE: the EE’s conditions of service/ER’s practice, as lump sum/calculated w/o
RLWB (par 2(1)(b) of 2nd Schedule) reference to a period
Remuneration paid to an employee who is married but the income is ▪ If remuneration includes an annual payment (AP), to determine the PAYE
deemed income of the spouse (s7(2)) to be withheld for that month, a calculation must be made for annual
equivalent including the AP and one excluding the AP
▪ The AP is already an annual amount and thus needn’t be converted to an
Deductions – par 2(4)(a) – (f):
annual equivalent
P/Pr fund contribution by EE, limited to s11F ▪ Examples: bonus, leave pay, merit awards
RAF contribution by EE, … (at option of ER) ▪ Fringe benefit received once ≠ AP – must be included in remuneration
RAF contribution by ER (fringe benefit), …
ER s18A donation on EE’s behalf, limited to 5% of balance of remuneration Medical tax credits – par 9(6):
after deducting the aforementioned Amount for s6A may be deducted if:
ER contributes to medical aid scheme (fringe benefit), or
For PAYE purposes s11F will be calculated as follows: EE makes contributes but has furnished ER w/ proof of payment
Limited to the lesser of:
①29 167 = 350 000 12
Amount for s6B may only be deducted where the EE ≥ 65 years if:
ER makes payment of medical expenses (fringe benefit), or
②27.5% of remuneration EE makes payment but has furnished ER w/ proof of payment (at the
option of ER)
- If employed for period less than 12 months, for PAYE purposes,
apportion ① for applicable months. Unused portion will be accounted s6B = 33.3% [Total contributions paid – (3 x s6A)]
for on assessment.
