Term 4
, Table of Contents
Chapter 10: Employees Tax ............................................................................ 3
Chapter 17: Capital Gains Tax ....................................................................... 22
,Chapter 10: Employees Tax
o Introduction
• employee’s tax is not an actual tax = a payment mechanism through which normal tax is collected.
• technically it is a withholding tax which is deducted at the source.
• The employee’s normal tax payable is reduced by the employee’s tax that was deducted from remuneration during
year
• Where an employer pays or is liable to pay an employee any remuneration:
è the employer has an obligation to deduct / withhold employees’ tax from this remuneration and the amount over
to SARS each month
è Mostly, the employer has to issue every employee with an employees’ tax certificate [IRP5/IT3 (a)] at the end of
each tax period showing the amount deducted for employees’ tax
• the employer must pay the withheld employee tax to SARS within 7 days after the end of the month when it was
withheld.
• If 7th day falls on a weekend or public holiday then the amount must be paid no later than the previous business day
before the weekend or public holiday as per section 244(1) of the Tax Administration Act
v Section 157 of the Tax Administration Act (TAA) and par 5:
• If the employer does not withhold employee’s tax or does actually withhold it but fails to pay the amount over to
SARS, the employer is then personally liable for the tax
• This liability for tax payment of the employer is a penalty (par5(5)) and so the employer cannot claim a deduction
section 11(a) of the ITA as this is prohibited by section 23(d).
v The link between the 4th Schedule and the ITA
• s 89bis(1) provides that the payment of employees’ tax (Ch 10) and provisional tax (Ch 11) must be made in
accordance with the provisions of the 4th Schedule to the ITA and that said payments are deemed to be made in
respect of taxpayer’s liability for “taxes”.
• The term “taxes” is defined in s 89bis(3) as bearing the same meaning as the term “tax” as defined in s 1(1) but
specifically excludes donations tax. The term “tax” in s 1(1) is defined as “any tax or a penalty imposed in terms of
this Act”.
• Therefore a liability for donations tax is not settled by way of employees’ tax or provisional tax payments.
v Definitions: Par 1 of the 4th Schedule to the ITA
Employer - the
Employee - the
Remuneration - the
Employee’s Tax - the
Labour broker - the
Personal service provider - the
, v BEFORE employee’s tax can be deducted:
4th Schedule requires the presence of all 3 elements
- employee, employer, remuneration
è an employer paying remuneration to an employee
Central definition: ‘remuneration’ - because it drives the application and relevance of the other two –
definition of employee requires that remuneration is received, and the definition of employer requires that remuneration
is paid.
o Remuneration
1) Calculate ‘remuneration’ and calculate employee’s tax = separate per employer for each individual employee
- Usually each remuneration amount which is paid or accrues to an employee will be subject to employee tax on that
amount – can be subject to exceptions or special rate rules
- If the amount is not defined as remuneration it will not be subject to employees tax
- 3 part definition: general definition, special inclusions and exclusions
• Non-residents: employee’s tax calculated only on remuneration earned from an RSA source
• Par 2(1) – Employee shall withhold employee’s tax when remuneration is paid or becomes liable to pay
amount to the employee.
• Par 2(1B) – employee’s tax on variable remuneration (s 7B) shall be withheld on the date on which amount
is paid to the employee.
• Variable remuneration is deemed to accrue to the employee on the exact date when the amount is paid
from the employer to the employee
DEFINITION AS PER PARAGRAPH 1:
Remuneration
• Amount of INCOME → exempt income NOT remuneration
• Paid or payable
• To any person
• By way of any: GENERAL part of the
• Salaries & wages / leave pay / overtime / bonus definition, followed
• Gratuity / Commission / fees /Pension / superannuation allowance by special inclusions
• Retirement allowance / stipend
• Whether in cash or otherwise
• Whether or not for services rendered
, Table of Contents
Chapter 10: Employees Tax ............................................................................ 3
Chapter 17: Capital Gains Tax ....................................................................... 22
,Chapter 10: Employees Tax
o Introduction
• employee’s tax is not an actual tax = a payment mechanism through which normal tax is collected.
• technically it is a withholding tax which is deducted at the source.
• The employee’s normal tax payable is reduced by the employee’s tax that was deducted from remuneration during
year
• Where an employer pays or is liable to pay an employee any remuneration:
è the employer has an obligation to deduct / withhold employees’ tax from this remuneration and the amount over
to SARS each month
è Mostly, the employer has to issue every employee with an employees’ tax certificate [IRP5/IT3 (a)] at the end of
each tax period showing the amount deducted for employees’ tax
• the employer must pay the withheld employee tax to SARS within 7 days after the end of the month when it was
withheld.
• If 7th day falls on a weekend or public holiday then the amount must be paid no later than the previous business day
before the weekend or public holiday as per section 244(1) of the Tax Administration Act
v Section 157 of the Tax Administration Act (TAA) and par 5:
• If the employer does not withhold employee’s tax or does actually withhold it but fails to pay the amount over to
SARS, the employer is then personally liable for the tax
• This liability for tax payment of the employer is a penalty (par5(5)) and so the employer cannot claim a deduction
section 11(a) of the ITA as this is prohibited by section 23(d).
v The link between the 4th Schedule and the ITA
• s 89bis(1) provides that the payment of employees’ tax (Ch 10) and provisional tax (Ch 11) must be made in
accordance with the provisions of the 4th Schedule to the ITA and that said payments are deemed to be made in
respect of taxpayer’s liability for “taxes”.
• The term “taxes” is defined in s 89bis(3) as bearing the same meaning as the term “tax” as defined in s 1(1) but
specifically excludes donations tax. The term “tax” in s 1(1) is defined as “any tax or a penalty imposed in terms of
this Act”.
• Therefore a liability for donations tax is not settled by way of employees’ tax or provisional tax payments.
v Definitions: Par 1 of the 4th Schedule to the ITA
Employer - the
Employee - the
Remuneration - the
Employee’s Tax - the
Labour broker - the
Personal service provider - the
, v BEFORE employee’s tax can be deducted:
4th Schedule requires the presence of all 3 elements
- employee, employer, remuneration
è an employer paying remuneration to an employee
Central definition: ‘remuneration’ - because it drives the application and relevance of the other two –
definition of employee requires that remuneration is received, and the definition of employer requires that remuneration
is paid.
o Remuneration
1) Calculate ‘remuneration’ and calculate employee’s tax = separate per employer for each individual employee
- Usually each remuneration amount which is paid or accrues to an employee will be subject to employee tax on that
amount – can be subject to exceptions or special rate rules
- If the amount is not defined as remuneration it will not be subject to employees tax
- 3 part definition: general definition, special inclusions and exclusions
• Non-residents: employee’s tax calculated only on remuneration earned from an RSA source
• Par 2(1) – Employee shall withhold employee’s tax when remuneration is paid or becomes liable to pay
amount to the employee.
• Par 2(1B) – employee’s tax on variable remuneration (s 7B) shall be withheld on the date on which amount
is paid to the employee.
• Variable remuneration is deemed to accrue to the employee on the exact date when the amount is paid
from the employer to the employee
DEFINITION AS PER PARAGRAPH 1:
Remuneration
• Amount of INCOME → exempt income NOT remuneration
• Paid or payable
• To any person
• By way of any: GENERAL part of the
• Salaries & wages / leave pay / overtime / bonus definition, followed
• Gratuity / Commission / fees /Pension / superannuation allowance by special inclusions
• Retirement allowance / stipend
• Whether in cash or otherwise
• Whether or not for services rendered
