3. Principles of Remuneration and Income
An understanding of the basic concepts of employees’ tax (during the tax year) and income tax (at the end of the tax year) will be of help when formulating a travel policy for your company that is cost-efficient, fair to all parties, and compliant with the legislation.
During the tax year, usually, on a monthly or weekly frequency, remuneration is paid by the employer to the employee in return for the employee working for the employer.
After allowing legitimate deductions from remuneration, the employer must calculate employees’ tax (PAYE), pay it monthly to SARS, and report the remuneration, deductions, and employees’ tax on tax certificates at the end of the tax year to inform the income tax calculation.
At the end of the tax year, the employee tax certificates submitted to SARS by the employer are recorded on the SARS database and inform what is known as the income tax assessment processing of the annual ITR12.
Those employees who are required to do so (or those who decide to do so by choice), submit an annual ITR12 return to SARS and income tax is calculated by SARS.
Employees can claim allowable deductions from income on the ITR12 that were not deducted from remuneration by the employer in the payroll to reduce taxable income and calculate the final amount of income tax after taking rebates and total employees’ tax deducted during the tax year into account.
These allowable deductions include legitimate business travel expenses (incidentally, statistics show that business travel expenses are one of the largest and most frequent deductions that are claimed on assessment).