SOURCE CODE DESCRIPTIONS IRP5 code 4587

Deduction codes

In the electronic file IRP5 code 4587 is used for: Section 10(1)(o)(ii) exemption considered by the employer for PAYE purposes
Basic Principles:
1 The exemption remains an assessment determination by SARS (i.e. when the completed ITR12 return is submitted by the employee to, and processed by, SARS).
2 Employers are therefore required to declare the foreign service remuneration as per the SARS Business Requirements Specification: PAYE Employer Reconciliation or notices issued to employers in this regard. SARS will determine whether the exemption is allowable when processing the ITR12 return submitted to SARS by the employee based on the information provided in the ITR12 return together with the IRP5/IT3(a) certificate information submitted by the employer.
3 The possibility that the employee may qualify for the exemption does not automatically waive the obligation of an employer to deduct and pay PAYE. Where an employer is satisfied that the exemption will apply, the employer may choose not to deduct and pay PAYE. However, where the exemption is not allowed when the ITR12 of the employee is processed, the employer will be liable for the PAYE not deducted as well as the concomitant penalties and interest.
4 The following foreign service income source codes are included in the remuneration which qualifies for the s10(1)(o)(ii) exemption and which employers may consider for calculating PAYE, if all requirements are met:
· Income Source codes – 3651, 3655, 3656, 3657, 3672
· Allowance codes – 3751(the full amount must be included), 3763, 3767, 3768, 3772
· Fringe Benefit codes – 3851, 3852 (the full amount must be included), 3855, 3856, 3858, 3859, 3860, 3863, 3866 (the full amount must be included), 3867, 3870, 3875, 3878, 3879, 3881, 3883, 3885.

The prescribed Length of IRP5 code 4587 in the electronic file is: N15

The abbreviations used within the description of the relevant codes mean:
• PAYE: Income is subject to the deduction of Employees’ Tax and will also be taxed when the income tax assessment for the employee is processed.
• IT: Income is not subject to the deduction of Employees’ Tax but will also be taxed when the income tax assessment for the employee is processed.
• Excl: Income is not subject to the deduction of Employees’ Tax and will also not be taxed when the Income Tax assessment for the employee is processed.
• Excl/PAYE: Depending on the circumstances described in the legislation, the income is either subject to both PAYE and Income Tax, or it is excluded from both PAYE and Income Tax