Understanding your e_mployment status on payroll LI

Understanding the revision of tax status updates on payroll

April 10, 2024

by admin with No Comment Article Tax

Labour brokers

A labour broker – someone who provides and remunerates workers for a client (for payment)

may or not be and in possession of an exemption certificate.

The Fourth Schedule allows for an exemption certificate to be issued by SARS to a labour broker (if a set of conditions is met)

this absolves the employers from having to withhold PAYE from payments made to the labour brokers.

Employers must withhold PAYE from payments made to labour brokers WITHOUT an exemption certificate.

Foreign employment

SARS PAYE Business Requirements Specification (BRS) – any remuneration received due to employment outside of South Africa must be reported on foreign services income codes.

irrespective of whether a portion of that amount may qualify for exemption.

if a tax resident employee works outside of SA on behalf of an employer, then certain remuneration is exempt from tax (up to a limit of R1.25 million per tax year).

IF the following conditions are met:

the employee is working outside SA for a period exceeding 183 full days in total during any 12-month period, and
for a continuous period exceeding 60 full days during that period of 12 months.

Employees in standard employment

an employee (including a scholar or student) works for a single employer for at least 22 hours per week.
(excludes temporary periods of absence due to exceptional circumstances or a temporary reduction in working hours).
is deemed to be in standard employment.
should be taxed according to the progressive personal income tax tables.

How Does It Work?

The following tax statuses have been renamed to an [Obsolete] tax status in April 2022. (Please refer to release note #29380 for more information).

Foreign Employment (No Tax) [Obsolete]
Labour Broker (Not Tax) [Obsolete]
Standard Employment (YTD) [Obsolete]

2. In future these tax statuses will no longer be available for selection. Tax statuses available on the payroll that pertain to labour brokers, foreign employment and standard employment include:

Labour Broker: Remuneration paid to a labour broker without a valid exemption certificate (IRP30) is subject to employee’s tax. The basic salary will be converted to tax code 3619 if the employee has a valid exemption certificate. If not, the tax code will be 3617 and the employee will be taxed as per the progressive tax tables.
Foreign Employment: Apply this tax status for a South African resident employee who earns income in a foreign country. Normal progressive tax tables will be applied but 50 will be added to all tax codes, for example, the ‘Basic Pay’ component’s tax code will display as 3651.
Standard Employment (Normal): The normal progressive tax tables will be applied.

Paymaster Impact

When adding an employee, the removed tax statuses will no longer be available to select. It will therefore be hidden on screen, when applying APIs and when uploading via bulk actions.
Existing employees linked to these removed tax statuses, will display blank in the tax status field.
The tax calculation and reports will still apply the tax status in the database.
When the user edits the screen, they will need to select a new status from the available list.
When accessing the information via APIs and bulk upload, the tax status of the employees linked to the removed tax statuses, will still display. However, when attempting to upload, an error will be returned, since the value does not exist.

Customer Action

Validate APIs if necessary.
Existing employees linked to an obsolete tax status should be converted to any of the available tax statuses.
If an employee’s tax status is changed in the middle of the tax year, a tax recalculation will take place.
If the newly selected tax status should be applicable from a specific date, terminate the employee on the Tax Profile screen and reinstate in the next open run selecting the option, Reinstate Starting a New Record. As a result, the employee will receive separate tax certificates based on the two tax records in the tax year.

Please contact your Paymaster payroll administrator if you need more advice regarding these revised tax statuses. Email us at outsourcepayroll@paymaster.co.za

EMP501 Reconciliation Prep: Five Must-Do Tasks

March 28, 2024

by admin with 2 Comments Article Tax Year End

As we step into April, employers are reminded of the upcoming annual EMP501 Reconciliation Submission period. This process, occurring twice a year, requires employers to reconcile their IRP5/IT3(a) tax certificates, EMP201/EMP501 statements, and actual payments to SARS using e@syFile software. The February EMP501 reconciliation will reconcile the values for the entire tax year of 1 March 2023 – 29 February 2024 and will generate tax certificates for all employees on eFiling.

Here are five key steps to ensure a smooth EMP501 Reconciliation process:

1. Check that all the employee details are accurate and complete

Please check that all the information required by the receiver of revenue is correct and complete for all employees. So you will want to draw a report from your payroll system listing the following:

a) Address of the employee

b) Banking details of the employee

c) Identity number or passport number

d) Tax reference number

2. Reconciliations are done – payroll to tax paid

Reconcile all tax payments made to the receiver of revenue to the figures declared on the EMP201 form submitted to SARS. These must balance. If they do not balance you need to correct the issue as soon as possible, or make a note of why so that you can explain the differences on your annual submission. The best way to do this is to get the EMPSA from SARS. This shows the actual payments that they have recorded for the year. This can be compared with YTD totals from the payroll system. If they do not tie up then a correction can be made with the February EMP201. This means that the EMP501 reconciliation on Easyfile should not be a problem.

3. Confirm all submissions to SARS

Check to make sure that SARS have received all your EMP201 submissions and that there are no outstanding issues that need to be dealt with. It is always a good idea to keep up to date with SARS documentation.

Articles main 2024 – Keep up to date with SARS

4. Remind car holders to take mileage 1 March

Remind employees with company cars or car allowances to record their mileage from 1 March. Ensure company car details are accurately recorded in the payroll system.

5. Resolve any outstanding tax issues (retirement annuity numbers etc)

Make sure that all the earnings and deductions are listed under the right Payroll Codes (a list is available on the SARS website). In addition, make sure you have all the information for any retirement annuities you have been processing.

It is a useful exercise to run a ‘test IRP5 upload’ as this can show any oddities like negative 3601 income and negative non-retirement funding income which can be corrected in the February payroll. This also throws up incomplete addresses, business telephone numbers, retrenchment payments without directive numbers etc. These all have to be correct before Easyfile will accept the upload file.

For any assistance or queries, don’t hesitate to contact our Helpdesk at help@paymaster.co.za

Wishing you a smoothe and successful submission period!

The New Tax year – starts 1 March

February 21, 2023

by admin Article Tax

1 March is the day

From 1 March, you will be rolling over into the new tax year. Most payroll systems now “lock down the old tax year” and you can no longer change any of that information. So sort out any issues before the tax year-end. You really don’t want to start having to open the payroll to change earnings or deductions or add information once 7 March has come.

Here are five things that will make your life easier:

1) Check that your employees details are complete

Check that all the information required by the Receiver is correct and complete for all employees. To do this, you need to draw a report from your payroll system listing the following:

Address of the employee.
Banking details of the employee.
Identity, work permit or passport number.
Tax reference number.

2) That all reconciliations are done – payroll deductions to Emp 201 submitted and paid to SARS

Reconcile all Emp. 201 payments made to SARS to the figures declared on the monthly Emp. 201 form submitted to the Receiver. These must balance. (If not, correct the issue as soon as possible – or make a note of why there is a difference, so you can explain it on your annual submission).
The best way to check the balances is the EMPSA from SARS. This shows the actual payments that have been recorded for the year, and can be compared with the year-to-date totals from your payroll system. If this balances then the Emp.501 reconciliation on Easyfile should not be a problem.

3) Confirm all submissions to SARS

Check to make sure that SARS has received all your EMP.201 submissions and that there are no outstanding issues that need to be dealt with. It is ALWAYS a good idea to keep up to date with SARS documentation.

4) Remind company car and travel allowance holders

Remind all your employees who have company cars or car allowance to record their millage first thing on 1 March. Make sure all the details of the vehicle are recorded on the payroll. They will need to upload their log book or make sure that the logbook is complete for the tax year.

5) Resolve any outstanding issues

Make sure that all the earnings and deductions are listed under the right payroll codes. In addition, make sure you have all the information for any retirement annuity and medical aid tax deductions you have made.

It is a useful exercise to run a test IRP 5 upload, since this can show you any faulty issues, such as negative 3601 income or negative retirement funding income which can be corrected in the February payroll. It will also give you any area of incomplete or missing information. These all have to be corrected before Easyfile will accept the upload file.

Guide for codes – employee tax certificates 2023 (click here)

List of registered bargaining councils (click here)

If this feels to overwhelming, consider joining the many happy Paymaster clients. Contact our Helpdesk for additional information.

Foreign tax legislation brings shift in SA payroll management

September 15, 2015

by admin with No Comment Tax

THE introduction of foreign legislation such as the US Foreign Account Tax Compliance Act (Facta) will bring about a fundamental shift in the way South African employers manage their payrolls.

South Africa has become a signatory to the inter-governmental agreement with the US that requires financial institutions to provide financial information on US citizens in South Africa.

Beatrie Gouws, associate director at KPMG, says Facta was followed by the Common Reporting Standards issued by the Organisation of Economic Co-operation and Development, which has been called Facta ‘on steroids’.

The G20 finance minister endorsed the Common Reporting Standards for the automatic exchange of tax information in February last year with the first exchanges scheduled for 2017.

“It means all the information of foreigners that is in the banking system or financial system will be provided to the South African Revenue Service (SARS) who will share it with other revenue services,” Ms Gouws said at the annual Tax Indaba in Sandton recently.

“The introduction of these two elements is going to explode our world, because things are no longer within the employer and within the payroll where nobody else knows about it. There will be intense scrutiny on what you do and how you do it,” she said.

Another issue that has been causing employers nightmares is the statement of account. Ms Gouws says SARS is permitted to take money from a taxpayers account if the taxpayer is in arrears.

Piet Nel, head of the School of Applied Tax at the SA Institute of Tax Professionals, says a statement of account records all the monthly payments of employee taxes such as pay-as-you earn, skills development levy and unemployment insurance.

The account is supposed to be nil, but differences arise because of the late capturing or recognising of payments by SARS, automatically levying a penalty of 10%.

Mr Nel says if there is a balance outstanding and the employer does not have a suspension of debt request or an instalment agreement, SARS is entitled to take the outstanding amount from the employer’s bank account. This does not happen often but SARS is entitled to do that, he says..

Ms Gouws tells of an instance where an employer was under the impression that his affairs with SARS was in order, and did not request a statement of account regularly.

However, there were some issues with the account of which the employer was unaware. SARS took what it believed was owned from the business account.

The owner could not pay his employees and the factory was subsequently burnt down.

“The ramification of not getting it right is real. You need to check if every single link in the chain is closed,” Ms Gouws warns.

Personal income tax is government’s biggest revenue source and amounts to 35% of the total taxes collected. According to Ms Gouws, 90% of this is collected through the employees’ tax system.

Employers need to realise that they are not simply a conduit for employees’ taxes. There are big tax management risks, she says.

First published on BDLive BY AMANDA VISSER, 12 SEPTEMBER 2015, 12:12

Should I be paying tax?

July 20, 2015

by admin with No Comment Employee Tax Latest Payroll News PAYE Tax Uncategorised

Should I be paying tax?

It’s something we all wish we did not have to pay and it is one question that comes up time and time again. There a many questions the average employee or even employer asks and many of them one would assume have obvious answers but tax does not have obvious answers and it is dangerous to hazard a guess when discussing tax and answering questions such as laid out below.

Question:

I earn a basic wage of R1720.00 per week and I have deductions.

My deductions are:

UIF = R17.00

Provident Fund = R111.00