If there is a tax calculation difference between what was calculated in the payroll and what is being assessed by the South African Revenue Service (SARS), it is important to investigate the reasons for the variance and take appropriate steps to address the issue. Here are some steps you can take to resolve a tax calculation difference:
1. **Review the Calculations:** Begin by carefully reviewing the tax calculations that were done in the payroll system and compare them with the assessment from SARS. Look for any discrepancies or errors in the calculations that could explain the difference.
2. **Check for Data Accuracy:** Verify that all the data used in the tax calculations, such as income amounts, deductions, allowances, and tax rates, are accurate and up to date. Even small errors in data entry can lead to significant differences in tax calculations.
3. **Consult Tax Professionals:** If you are unable to identify the cause of the tax calculation difference on your own, consider seeking assistance from tax professionals or consultants who have expertise in tax matters. They can help you review the calculations and provide guidance on how to rectify any errors.
4. **Communicate with SARS:** If you believe there is an error in the assessment from SARS, you can communicate with them to seek clarification and resolve the issue. Provide them with any relevant information or documentation that supports your calculations.
5. **Make Corrections:** If errors are identified in the initial tax calculations, make the necessary corrections in the payroll system and ensure that future calculations are done accurately to avoid similar discrepancies in the future.
6. **Keep Records:** Maintain detailed records of the tax calculations, assessments, and any correspondence with SARS

Under-Deduction
Where there is an under-deduction of employee’s tax from an employee’s remuneration:
• Pay the shortfall (employees’ tax, UIF and/or SDL) amount to SARS. Penalties and interest may be payable;
• Recover the shortfall (employees’ tax only) from the employee;
• Issue an amended IRP5/IT3(a) certificate for the transaction year in which the under-deduction occurred to the employee, once the employees’ tax shortfall has been recovered;
• Submit the amended IRP5/IT3(a) certificate to SARS showing the correct withholding. The employer may only submit such amended certificate once all the employees’ tax has been recovered from the employee; and
• Determine the reason for the under-deduction. If it is as a result of a calculation error or incorrect setting in the payroll system, the necessary changes must be made to avoid such incorrect deductions in future.
Where the employee’s ITR12 return has already been assessed, the employee must resubmit the ITR12 through the Request for Correction (RFC) process or, if the ITR12 was audited, the employee must lodge an objection.
Where the employer cannot recover the under-deduction of employees’ tax from the effected employee, such amount will be deemed to be a penalty payable by the employer only. The relevant tax amount MUST NOT be reflected on any certificate. PAYE MUST be declared in the “Tax Paid on Behalf of Employee” field on the EMP501. SDL and UIF MUST be declared in the “Audit Result not in Certificates” field on the EMP501.
Over-Deduction

Where there is an over-deduction of employment tax from an employee’s remuneration:
• Determine if the over-deduction is per request of the employee and ensure that the field “Voluntary Over Deduction” on the certificate is updated to “Yes”. Please note that the employee must submit a request for over-deduction to the employer in writing;
• For PAYE, do NOT correct the over-deduction of PAYE, regardless of the reason for over-deduction;
• For SDL and UIF, amend the certificate where it was overstated, and resubmit the certificate to SARS. The amendments must be submitted for the transaction year for which the overstatement occurred.
• Inform the employee to submit an ITR12 to claim a refund; and
• Determine the reason for the over-deduction. Where the over-deduction is as a result of a calculation error or incorrect setting in the payroll system, the necessary changes must be made to avoid such incorrect deductions in future.
How to Amend Certificates
• Where there are no changes required for the type of certificate [IRP5 or IT3(a)] or the transaction year or the year of assessment, the certificate must be amended (same certificate number).
• Where either the type of certificate [IRP5 or IT3(a)] or the transaction year or the year of assessment must be amended, the original certificate issued must be cancelled and replaced with a new certificate (new certificate number).
Examples which can result in an over- or under-deduction
• Unpaid extended sick leave
• Retrenchment
• Resignation
• Retirement
(Ref. https://www.sars.gov.za/types-of-tax/pay-as-you-earn/employment-taxes-validation-etv/)

If the Income Tax Reference Number is duplicated for multiple employees in your records, it is crucial to rectify this issue promptly to ensure accurate tax reporting and compliance. Here are steps you can take to address the duplication of Income Tax Reference Numbers:
1. **Identify the Duplicates:** Review your employee records to identify which employees have the duplicated Income Tax Reference Numbers.
2. **Correct the Information:** Update the Income Tax Reference Numbers for the affected employees to ensure that each employee has a unique and correct number assigned to them.
3. **Notify the Employees:** Inform the affected employees of the correction made to their Income Tax Reference Numbers.
4. **Update SARS Records:** Submit the corrected Income Tax Reference Numbers to the South African Revenue Service (SARS) through the appropriate channels to ensure that their records are updated accordingly.
5. **Maintain Accurate Records:** Keep detailed records of the changes made to the Income Tax Reference Numbers for future reference and auditing purposes.
It is essential to rectify any errors or discrepancies in the Income Tax Reference Numbers to avoid potential issues with tax compliance. If you require further assistance or guidance on correcting duplicated Income Tax Reference Numbers, you can reach out to SARS directly or consult with a tax professional for support.
You must ensure that you have the correct Income Tax Reference number for each employee. If you do not have the Income Tax Reference number for an employee or you are not sure if the Income Tax Reference number that you have is correct, the “What is my Tax Number” service on the SARS webpage can be used to obtain the correct Income Tax Reference number for the employee and update your records. You do not have to resubmit these certificates. ( REF: https://www.sars.gov.za/types-of-tax/pay-as-you-earn/employment-taxes-validation-etv/)

Commission agents in South Africa are typically not considered employees but rather independent contractors or self-employed individuals. As such, they are responsible for managing their own tax affairs, including paying their own taxes such as income tax and provisional tax. Commission agents are not subject to employee’s tax (PAYE) as they are not employees in the traditional sense and do not receive a salary or wages from an employer.
It is important for commission agents to keep accurate records of their income, expenses, and any taxes owed to ensure compliance with tax laws and regulations in South Africa. Commission agents may be required to register for tax purposes and submit tax returns to the South African Revenue Service (SARS) based on their commission earnings. It is recommended that commission agents consult with tax professionals or SARS directly to understand their tax obligations and ensure compliance with tax laws.

• If the employee is in possession of a tax directive, the employer MUST deduct employees’ tax according to the instructions on the tax directive and the employees’ tax deducted reflect as PAYE on the IRP5/IT3(a).
• If the employee is in possession of a tax directive, the employer MUST deduct employees’ tax according to the instructions on the tax directive and the employees’ tax deducted reflect as PAYE on the IRP5/IT3(a). GUIDE FOR EMPLOYERS IN RESPECT OF Revision: 0 Page 30 of 41 EMPLOYEES’ TAX (2025 TAX YEAR) – PAYE-GEN-01-G19 Application form IRP5/IT3(a) details Example
• If the employee is not in possession of a tax directive, the employer MUST combine the salary and commission and deduct employees’ tax according to the applicable tax deduction tables and a PAYE calculation must be done at the end of the tax year or tax period. Under no circumstances may 25% or any other percentage for that matter, be deducted from remuneration, unless the tax directive so directs.
• An employee earning commission may only apply for a tax directive where his/her remuneration consists mainly in the form of commission based on the employee’s sales or turnover attributable to him/her.
• Commission income reflect under code 3606 and the salary income under code 3601. (PAYE-GEN-01-G19 PAR 13.8)

Calculating PAYE on an accommodation benefit involves determining the value of the accommodation provided by the employer and applying the appropriate tax rate.

This is based on a formula and the remuneration earned by the employee and is only the lower of the formula or actual costs to employer if obtained at arms length transaction with unconnected person – or actual costs if it is holiday accommodation”

Seventh Schedule Paragraph 9(3)

The taxable value of the accommodation is calcualted with a formula. The forumla is: (A-B) x (C/100) x (D/12)

(3) Subject to the provisions of subparagraph (3C) and (4), the taxable value to be placed on such accommodation for any year of assessment shall be an amount determined in accordance with the formula: (A-B) x (C/100) x (D/12)
in which formula—
(i) “A” represents the remuneration proxy as determined in relation to the year of assessment;
(ii) “B” represents an abatement equal to an amount of R83 100: Provided that in any case where—
(aa) the employer is a private company and the employee or his spouse controls the company or is one of the persons controlling the company, whether control is exercised directly as a shareholder in the company or as a shareholder in any other company; or
(bb) the employee, his spouse or minor child has a right of option or pre-emption granted by the employer or by any other person by arrangement with the employer or any associated institution in relation to the employer whereby the employee, his spouse or minor child may become the owner of the accommodation, whether directly or indirectly by virtue of a controlling interest in a company or otherwise,
the said abatement shall be reduced to zero;

(iii) “C” represents a quantity of 17: Provided that where the accommodation consists of a house, flat or apartment consisting of at least four rooms—
(aa) “C” represents a quantity of 18 if—
(A) such accommodation is unfurnished and power or fuel is supplied by the employer; or
(B) such accommodation is furnished but power or fuel is not supplied; or
(bb) “C” represents a quantity of 19 if such accommodation is furnished and power or fuel is supplied by the employer; and
(iv) “D” represents the number of months in relation to a year of assessment during which the employee was entitled to occupation of such accommodation.

Therefore, in terms of the definition of remuneration proxy no deductions can be made, it is therefore “remuneration” as defined in the Fourth Schedule.

Furthermore, it depends on the employment date of the employee:
• If employee was not employed in the previous year, it is this year’s remuneration grossing up in relation to the pay periods in tax year and pay periods worked.
• If the employee was employed for the full previous tax year, it is the remuneration received for that year.
• If the employee was employed for a portion of the previous tax year, it is the remuneration received during that portion which must be gross-up in relation to the full year.

Non-standard employment in South Africa refers to an employment arrangement where an employee works for more than 22 hours in every completed week for an employer. In non-standard employment, the employee may work longer hours or have a different work schedule compared to standard employment. Non-standard employment may include full-time employment, part-time employment, temporary or fixed-term contracts, casual work, or any other arrangement where the employee works more than 22 hours per week for the employer. It is essential for both employers and employees to be aware of the terms and conditions of non-standard employment to ensure compliance with labour laws and regulations governing such arrangements.
Any employment which cannot be classified under Standard or Deemed Standard employment.
Workers are employed on a daily basis and are paid daily, for example:
• Casual commissions paid, such as spotter‘s fees;
• Casual payments to casual workers for irregular services rendered or occasional services;
• Fees paid to part-time lecturers;
• Honoraria paid to office bearers of organisations, clubs, etc certificate (PAYE-GEN-01-G19 PAR 13.4)

Employee’s tax on standard employment income in South Africa is determined based on the employee’s total remuneration received from the employer during the tax year. The employer is responsible for deducting the correct amount of employee’s tax, also known as Pay-As-You-Earn (PAYE), from the employee’s salary or wages each month. The amount of PAYE deducted is calculated using the employee’s tax tables provided by the South African Revenue Service (SARS).
The tax tables take into account various factors such as the employee’s total annual income, tax rebates, and any allowable deductions to determine the correct amount of PAYE to be deducted. The employer must then remit the deducted PAYE to SARS on behalf of the employee by the specified due dates.
It is important for employers to accurately calculate and withhold the correct amount of PAYE from employees’ salaries or wages to ensure compliance with tax laws and regulations in South Africa. Employees should also keep track of their income, deductions, and tax withheld to verify that the correct amount of PAYE has been deducted by their employer.

In non-standard employment scenarios in South Africa, the determination of employee’s tax (PAYE) is based on the total remuneration received by the employee from the employer during the tax year. The employer is responsible for deducting the correct amount of PAYE from the employee’s income, taking into account any tax tables provided by the South African Revenue Service (SARS) that apply to the specific type of remuneration.

When calculating PAYE for non-standard employment income, the employer must consider the total remuneration received by the employee, including any bonuses, commissions, allowances, or other forms of compensation. The PAYE deduction is typically calculated based on the employee’s total annual income, tax rebates, and allowable deductions, using the relevant tax tables provided by SARS.
It is important for employers to accurately calculate and withhold the correct amount of PAYE from employees’ non-standard employment income to ensure compliance with tax laws and regulations in South Africa. Employees should also keep track of their income, deductions, and tax withheld to verify that the correct amount of PAYE has been deducted by their employer.

The Commissioner prescribes tax deduction tables for such classes of employees as the Commissioner may determine and also prescribe the manner in which they may be applied.
• Employees‘ tax must be calculated and deducted at 25% on the balance of remuneration.
• Where the employer is in possession of a tax directive in respect of an employee who is in non-standard employment, employees’ tax must be deducted in accordance with the directive (PAYE-GEN-01-G19 PAR 13.4)

Remuneration paid to a member of a close corporation is not subject to employee’s tax (PAYE) in South Africa. Members of close corporations are considered to be owners of the business rather than employees, and as such, the remuneration they receive is not classified as employee income. Instead, members of close corporations are typically taxed on the profits or income they receive from the close corporation as part of their individual tax obligations. It is important for members of close corporations to consult with tax professionals or the South African Revenue Service (SARS) to ensure compliance with tax laws and regulations related to their remuneration and tax obligations.
The definition of employee includes a director of a private company.
• Any remuneration paid or payable to a director of a private company or a member of a close corporation is therefore subject to the deduction of Employees’ Tax from 1 March 2002.
The definition of a company includes a close corporation and therefore, the same rules for the deduction of employees’ tax from the remuneration of directors of private companies apply to members of close corporations. This definition includes a person who, in respect of a close corporation, holds any office or performs any functions similar to the functions of a director of a company other than a close corporation. Any employment which cannot be classified under Standard or Deemed Standard employment. • Workers are employed on a daily basis and are paid daily, for example:  Casual commissions paid, such as spotter‘s fees;  Casual payments to casual workers for irregular services rendered or occasional services;  Fees paid to part-time lecturers;  Honoraria paid to office bearers of organisations, clubs, etc

An independent contractor is an individual or entity who provides services to a client or business under the terms of a contract or agreement. Independent contractors typically operate independently, have control over how the work is performed, and are not considered employees of the client or business. They may work on a project basis, set their own hours, use their own tools and equipment, and have the freedom to work for multiple clients.

In South Africa, the classification of an individual as an independent contractor is based on various factors, including the nature of the working relationship, the level of control exerted by the client or business, the provision of services on a non-exclusive basis, and the financial independence of the contractor. It is important to correctly classify workers as employees or independent contractors to ensure compliance with labor laws, tax regulations, and other legal requirements.

No, an independent contractor’s income is not subject to employee’s tax (PAYE) in South Africa. Independent contractors are responsible for managing their own tax affairs, including registering for and paying income tax directly to the South African Revenue Service (SARS). Independent contractors are not considered employees of the clients or businesses they provide services to, and as such, they are not subject to PAYE deductions on their income. It is important for independent contractors to fulfill their tax obligations by registering for income tax, submitting tax returns, and paying any tax due to SARS.
The Fourth Schedule prescribes that the independent contractor’s income will be deemed to be remuneration and will therefore be subject to Employees’ Tax, if —
• The services are required to be performed mainly at the premises of the person by whom the remuneration is paid/payable or of the person to whom such services were or are to be rendered;
• The person who renders or will render the service is subject to the control and supervision of any other person as to the manner in which his/her duties are performed or to be performed or as to his/her hours of work
• The employer, being a party to the employment contract, is in the best position to determine whether or not the employee is an independent contractor. SARS has therefore provided certain guidelines in order to assist the employer with this responsibility.
These guidelines are available in Interpretation Note 17 and can be obtained on the SARS website www.sars.gov.za.
The employees’ tax deducted for an independent contractor whether calculated according to the deduction tables or a tax directive must be reflected as PAYE. Reflect under code 3616 on the IRP5/IT3(a) certificate (PAYE-GEN-01-G19 PAR 13.2)

A labor broker is a person or entity that provides clients with workers to perform services or work for the client. Labor brokers act as intermediaries between clients who require labor and individuals seeking employment. They typically recruit, hire, and place workers with clients on a temporary or contract basis. Labor brokers may also handle administrative tasks such as payroll, benefits, and compliance with labor laws on behalf of the workers they place with clients.

Exemption certificates for labor brokers in South Africa are typically issued by the Compensation Fund. These certificates are granted to labor brokers who comply with the necessary requirements and regulations set out by the Compensation Fund. The issuance of exemption certificates is subject to the labor broker meeting specific criteria and fulfilling certain obligations as stipulated by the Compensation Fund. For precise details on the process and requirements for obtaining an exemption certificate as a labor broker, it is recommended to consult directly with the Compensation Fund or relevant authorities.

The requirements for obtaining an exemption certificate for a labor broker in South Africa are typically set by the Compensation Fund. Labor brokers seeking an exemption certificate must comply with specific criteria and fulfill obligations as stipulated by the Compensation Fund. These requirements may include demonstrating compliance with relevant legislation, ensuring proper record-keeping, and meeting certain financial and operational standards.

To obtain an exemption certificate, labor brokers may need to submit documentation and information to the Compensation Fund for review and approval. It is essential for labor brokers to adhere to the guidelines and regulations outlined by the Compensation Fund to qualify for an exemption certificate. For precise details on the specific requirements and process for obtaining an exemption certificate as a labor broker, it is advisable to consult directly with the Compensation Fund or relevant authorities.

The following is news flash 2024/23 published by the PAGSA on May 11, 2024 regarding Notification UIF uFiling changes

UIF: CHANGES TO THE UFILING BULK SUBMISSION PROCESS

The purpose of this Newsflash is to inform you that changes have been made very recently to the uFiling system.

During 2023, the PAGSA and the UIF authorities engaged in meetings to discuss improvements to the eDec method of submitting monthly declarations to the Fund (the normal payroll method), as well as improvements to uFiling.

This was followed on 26 April 2024 by a meeting scheduled by the Fund, in which the Fund informed us of the changes that the Fund was able to make to uFiling as a result of our discussions.

These changes are in operation from 8 May 2024, and mainly affect the ‘bulk submission’ process that makes use of spreadsheet files.

Some aspects of the changes are not clear, and we have asked the Fund for a follow-up meeting to address our uncertainties.

With this in mind, it would be best to leave the detail of the changes until we have clarity.

Note that there are no changes to the normal method of declaration where payrolls create a file in terms of the UIF E03 specification that is emailed to the Fund every month.

Regards,
Rob Cooper

The following content was published in Newsflash 2022/38 – Company Tax SARS notice on Supplementary IT14SD form

COMPANY TAX: SARS NOTICE ON SUPPLEMENTARY IT14SD FORM

SARS has issued a notice with regards to the “Removal of the supplementary IT14SD form” when a company submits its income tax returns.

The notice can be found below.