A fixed rate directive, also known as a Par2(2B) fixed rate directive, is a provision under the Fourth Schedule to the Income Tax Act in South Africa. It allows taxpayers who meet certain qualifying criteria to have a fixed rate of Pay-As-You-Earn (PAYE) tax deducted from their all remuneration paid by the employer.

The fixed rate directive is issued by the South African Revenue Service (SARS) and specifies the percentage of tax that should be withheld from the taxpayer’s remuneration paid by the employer. This fixed rate is applied instead of the regular PAYE deduction tables.

The recent SARS notice mentioned that the fixed rate directive rules have been revised, and additional criteria have been applied to ensure that the correct taxpayers are targeted and the correct fixed rates are prescribed. Some taxpayers who previously qualified for a fixed rate directive may no longer meet the criteria, resulting in a reduction in the number of impacted taxpayers.
If a taxpayer is no longer included in the revised fixed rate directive file, the administrator (employer) is required to revert to the regular PAYE rate as per the PAYE deduction tables or apply a higher rate specified in paragraph 2(2) of the Fourth Schedule if it is higher than the PAYE deduction tables.
If the revised fixed rate directive file prescribes a lower fixed PAYE rate than previously, the administrator may reduce the PAYE to be withheld for subsequent periods with amounts over-deducted in previous pay periods during the same year of assessment.