SONA Announcement of Intention to Review the Employment Tax Incentive Requirements
One item announced by the State President in the State of the Nation Address on 11 February 2022 will have a direct impact on payroll suppliers, and that is the intention to review the requirements of the Employment Tax Incentive Act. In recent years, other projects have been initiated to address the high levels of unemployment in the country (the Presidential Employment Stimulus programs, the Social Employment Fund, and the YES Initiative), but arguably the Employment Tax Incentive that focuses on young people aged 18 to 29 years of age has been the most successful. However, based on anecdotal evidence gained from speaking to many employers over many years, the take-up of the ETI project would have been even better had the requirements been simpler, and the risk to employers of getting it wrong been lowered. In several submissions to National Treasury since 2015 the PAGSA has requested a re-think of the troublesome aspects of the ETI Act, and in recent years, we have proposed changes that will significantly simplify the requirements. If these proposals are accepted, implementation of the ETI requirements will be easier for payroll suppliers, and the administration burden for employers will be reduced, therefore less costly and at a lower risk. The 2022 State of the Nation Address stated that:
“To encourage hiring by smaller businesses, we will be increasing the value and expanding the criteria for participation in the Employment Tax Incentive”
“The changes to the incentive will make it easier for small businesses in particular to hire young people.”
One hopes that the steps taken to simplify the requirements will apply to all employers, and not only to “smaller businesses”. The Budget proposals on 23 February 2022 will provide some more detail, even though the policy makers keep their cards close to their chests and their wording in the budget to a minimum. Once put into effect, this proposal in SONA will no doubt result in changes to payroll systems and to ETI administration processes but it is very welcome news for both payroll suppliers and for those employers that are part of the ETI project. Regards,
Rob Cooper
Chairman Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER.

Foreign Employment Income
10(1)(o) any form of remuneration—
(i) as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a ship engaged—
(aa) in the international transportation for reward of passengers or goods; or
(bb) in the prospecting, exploration or mining (including surveys and other work of a similar nature) for, or production of, any minerals (including natural oils) from the seabed outside the Republic, where such officer or crew member is employed on board such ship solely for purposes of the “passage” of such ship, as defined in the Marine Traffic Act, 1981 (Act No. 2 of 1981),
if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment;
(iA) as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a South African ship as defined in section 12Q (1) mainly engaged—
(aa) in international shipping as defined in section 12Q (1); or
(bb) in fishing outside the Republic; or
(ii) to the extent to which that remuneration does not exceed R1,25 million in respect of a year of assessment and is received by or accrues to any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C, in respect of services rendered outside the Republic by that employee for or on behalf of any employer, if that employee was outside the Republic—
(aa)
(a) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; or
(b) for a period or periods exceeding 117 full days in aggregate during any period of 12 months in respect of any year of assessment ending on or after 29 February 2020 but on or before 28 February 2021; and
(bb) for a continuous period exceeding 60 full days during that period of 12 months,
and those services were rendered during that period or periods: Provided that—
(A)for purposes of this subparagraph, a person who is in transit through the Republic between two places outside the Republic and who does not formally enter the Republic through a port of entry as contemplated in section 9 (1) of the Immigration Act, 2002 (Act No. 13 of 2002), or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs in terms of that Act, shall be deemed to be outside the Republic;
(B)the provisions of this subparagraph shall not apply in respect of any remuneration—
(AA) derived in respect of the holding of a public office contemplated in section 9 (2) (g); or
(BB) received by or accrued to any person in respect of services rendered or work or labour performed as contemplated in section 9 (2) (h); and
(C)for the purposes of this subparagraph, where remuneration is received by or accrues to any employee during any year of assessment in respect of services rendered by that employee in more than one year of assessment, the remuneration is deemed to have accrued evenly over the period that those services were rendered;
The purpose of this newsflash is to inform on clarification from SARS on some issues relating to Foreign Employment Income. On 28 June 2021, SARS updated the Interpretation Note #16 (Issue 4): Exemption from Foreign Employment Income in terms of section 10(1)(o)(ii). Complying with the “183/60-day” test
When an employer requires an employee to renders services outside the Republic on its behalf, such employer might assume that the ‘183/60-day’ test will be met based on the period relating to the services to be rendered outside RSA. However, employers cannot be sure that this requirement has been met due to the fact that an employee might return to the RSA for a weekend, etc. In such cases, the employer will count the weekend as part of the days outside the RSA. normal income code, increase with 50). Paragraph 11B was repealed by s.

SARS Notice: Fixed Rate Directive Rules and Incorrect File information
SARS has released a notice with regards to the above. The SARS notice follows below. Regards,
Rhona van Taak
Admin Manager Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER

SARS Notice: Tax Directive Webinar
SARS are presenting a webinar on the Tax Directive system. The details are in the notice below. Invitation to a webinar on Tax Directives
Dear Taxpayer
The South African Revenue Service (SARS) invites you to a webinar on Tax Directives for taxpayers, tax practitioners and fund administrators. A tax directive is an official instruction from SARS to a taxpayer’s employer or fund manager to deduct tax at a set rate, determined by SARS. This directive ensures that a fair rate of tax is paid on your earnings, especially for larger or irregular payments. An approved tax directive is only valid for the tax year or period that it was applied for. Our strategic objectives include providing taxpayers with clarity and certainty, as well as making it simple for them to meet their tax obligations. The aim of the Tax Directives webinar is to educate the taxpayer on this specific process. As an important stakeholder, we invite you to join the webinar, and to extend the invitation to other interested parties. The following topics will be covered:
•Types of Tax Directives
•Type of Tax Directives by Tax Practitioners on behalf of Individuals and Employers
•Tax Directive application process
•Timelines for the Tax Directives applications
•Tax Directive updates/ changes
•Access to Tax Directives via eFiling
Details of the webinar are as follows:
Theme: Tax Directives Date: Thursday, 16 February 2023 Time: 17:00 – 19:00 Platforms: Zoom and YouTube
Register in advance for this webinar on the following link:
https://sars-gov-za.zoom.us/webinar/register/WN_pmIvvysnSzuBqvvvyLV9lQ
Meeting ID: 989 3621 1798
Passcode: 334253
After registering, you will receive a confirmation email with information on how to log on to the webinar. The webinar will be recorded and posted on the SARSTV YouTube channel after the event. YouTube: https://youtube.com/live/CrjDUA3Tzm0?feature=share
If you have questions about Tax Directives, please send an email to [email protected]
Issued by: Taxpayer and Trader Education and Policy and Procedure Enforcement
Regards,
Rob Cooper
Chairman Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER.

SARS Notice: Employer Filing Season
SARS has issued the following notice relating to the employer filing season in respect of the interim period ending August 2022. The notice can be found below. Regards,
Rhona van Taak
Admin manager: Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER
Message to Employers/Stakeholders
Please be advised that in preparation for the opening of the Employer Interim Reconciliation Filing Season on 19 September 2022, the prepopulated liabilities reflected on the Reconciliation Declaration (EMP501) during the period 14 to 16 September 2022 may not be complete. •This will only affect employers for whom a Revised Declaration (EMP201) was processed from 14 to 16 September 2022, for a month during the relevant EMP501 reconciliation period. •Affected employers are advised to submit such a Reconciliation Declaration (EMP501) from Monday, 19 September 2022.

Changes to the ETI Formulas to Increase the Value of the Employment Tax Incentive
In the Budget Review of 23 February 2022, the Minister of Finance announced changes to the ETI calculation formulae that increase the value of the ETI amount by up to 50%, effective from 1 March 2022. First some background. SONA Announcement
The State President in his State of the Nation Address earlier in February 2022 announced as follows:
1.“To encourage hiring by smaller businesses, we will be increasing the value and expanding the criteria for participation in the Employment Tax Incentive.”, and
2.“The changes to the incentive will make it easier for small businesses in particular to hire young people.”
I have underlined the three sets of wording to put focus on what appears to be the intention in the SONA to change three areas of the ETI Act. This wording is repeated in Chapter 4 of the 2022 Budget Review. As matter stand, only the “increasing the value” part of this intention has been turned into legislation by changing the ETI formulae from 1 March 2022 by announcement in the 2022 Budget. The ‘suggested’ changes to the other two areas of the ETI Act will presumably be addressed later during the year. Refer to PAGSA Newsflash 2022-05 for a short discussion of the SONA announcement. 2022 Budget Review
The 2022 Budget Review has put the SONA announcement of the ETI increase into immediate operation by:
1.Including the new ETI calculation formulae in the 2022 draft Rates Bill (the Rates and Monetary Amounts and Amendment of Revenue Laws Bill)
2.Making the new ETI calculation formulae effective from 1 March 2022. Note that section 7A of the ETI Act allows the Minister of Finance to propose changes to sections 4, 5, 6, or 7 of the ETI Act in the Budget Review and to also propose an effective date for these changes (in this case, 1 March 2022). The changes are legal for a period of 12 months from the proposed effective date if the proposed changes to the ETI Act are promulgated within that 12-month period. The ETI calculation formulae are specified in section 7 of the ETI Act, and the new formulae have already been issued in the draft Rates Bill that will be promulgated within the next 12 months, so this aspect of the change is legal (unlike the proposal in the 2021 Budget to increase the UIF contributions limit from 1 March 2021). The Budget proposed an increase to the value of the ETI of up to 50% to encourage employers to participate in the ETI project, and by so doing, help to reduce the extremely high levels of unemployment amongst young people. Change to the ETI Calculation Formulae
Unfortunately, the ETI calculation formulae specified in the Rates Bill that was issued on 23 February, are incorrect. This was pointed out by a wide-awake member of the PAGSA Exco, taken to the authorities by the PAGSA, and after a flurry of discussions, resulted in the Rates Bill of 23 February being withdrawn and replaced by a new Rates Bill on 25 February 2022 that specifies the correct ETI formulae. The error in the Rates Bill of 23 February 2022 is that the percentages in the formulae in the ‘R4,500 to R6,500’ bracket for both the first and the second 12 months, were not increased by 50% as were the other elements of the formulae. These percentages remained (incorrectly) the same at 50% and 25% respectively. The ETI formulae in the Rates Bill of 25 February 2022 are now correct. The old formulae up to 28 February 2022, and the new (correct) formulae from 1 March 2022, are set out in the two tables below. Incidentally, the incorrect formulae would have resulted in far more ETI being calculated than what the policymakers envisaged with the changes, so correcting this error has saved the fiscus a considerable amount of money. Tax Certificate Reporting Of the monthly ETI information
PAYE BRS version 21.0.0 provides the rules for tax certificate submissions by payrolls for the 2023 tax year (i.e. from 1 March 2022 up to 28 February 2023) and was issued a few days before the Budget announced the ‘up to 50%’ increase to the value of the ETI amount.

Preliminary Notice of the 2022 PAGSA Annual General Meeting
This serves as a preliminary notice that the PAGSA Annual General Meeting will be held on 13 June 2022 from 09h00. Unfortunately, while I prefer a face-to-face meeting, it will have to be a Zoom venue, and the PAGSA will arrange and manage the meeting ourselves as we have done in the past with the face-to-face AGM meetings. The invitations will be issued a few days before the meeting, but please put the date in your calendar in the meantime. The method of voting for Exco members will change slightly to fit the circumstances of a virtual meeting and the new procedures will be included in the formal notice pack. Note that all the current Exco members have confirmed that they are available to serve another term on the Exco. The morning will be split into two separate meeting sessions, each with its own Zoom invitation, as follows:
1.AGM Formal Session:
09h00 to 10h30
To be attended by: Payroll supplier members only
30 Minute Break (to give you time to attend quickly to emails, get something to eat and drink, etc.)
2.Information session:
11h00 to 12h30
To be attended by: Payroll supplier members, Associate members, and SARS representatives. SARS have kindly agreed that a number of their senior personnel will attend the Information Session portion of the meeting. The Information Session from 11h00 is planned to include:
1.PAGSA: PAYE Fixed-rate Calculation issues (currently under discussion)
2.SARS: Keynote address by Mark Kingon. Please note that SARS welcome and appreciate input from the PAGSA members attending the Information Session, and I have no doubt that as in the past, Mark will encourage you to give him feedback on SARS issues from a payroll and employer perspective. So prepare yourself for this. Any questions that you might have can also be put to SARS. While the PAGSA benefits enormously from the relationship that we have built over the years with SARS, the reverse is also true. SARS appreciate and place a high value on credible and balanced feedback from the PAGSA to assist them to improve their services and products. The formal AGM notices will be issued as soon as possible, but there are no resolutions for changes to our constitution. Regards,
Rob Cooper
Chairman Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER.

e@syFile Release version 7.2.6
SARS has release an updated version of the e@syFile software last night. Although version 7.2.5 was not officially released, the changes were included in this latest release. The details of the changes are as follows:
Release Notes: e@syFile™ Employer version 7.2.6
Adjustment to EMP501 submission files to align validation for Tax Directive numbers with the SARS PAYE BRS
Release Notes: e@syFile™ Employer version 7.2.5 (delayed and included in V7.2.6)
Adjustment to PDF rendering to allow OS default application
Clients with 64 bit should be able to print PDF documents from today without reinstalling 32 bit (7.2.5). Numerous complaints were also received from clients when ‘Updating’ after submission and error 1016 was displayed. Due to this error files were unfortunately not processed. Clients who received this error must please resubmit using the full resubmission functionality on the ‘Utilities’ menu from today with the updated e@syFile version. PDF rendering was added. It is ticked by default but if not, employers must please ensure it is ticked to activate. Regards,
Rhona van Taak
Admin Manager Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER

Increase to the National Minimum Wage Hourly Rates
Important national minimum wage information has been published in the following two Gazettes:
1.National Minimum Wage Commission Review Report [Gazette # 45649 on 17 Dec 2021]
2.National Minimum Wage Act Amendment – Increased Wage Rates [Gazette # 45882 on 7 Feb 2022]. Legislation Background to NMW Increases
Effective from 1 January 2019, the National Minimum Wage Act (NMW Act) provides for the national minimum wage rate requirements and related matters, and instructs that the minimum wage rates must be reviewed annually. NMW Act Section 4(2)
Any minimum wage rate that is not reviewed regularly would soon fall behind inflation and cease to be relevant. The intention to change the rates on an annual basis is specified in section 4(2) of the NMW Act, and the responsible party is the National Minimum Wage Commission that is established and given responsibilities and duties in sections 6 to 14. NMW Act Section 9
Section 9 sets out the composition of the Commission, as follows:
1.A chairperson appointed by the Minister
2.three members nominated by organised business
3.three members nominated by organised community
4.three members nominated by organised labour, and
5.three independent experts, who are knowledgeable about the labour market and conditions of employment, appointed by the Minister. NMW Act Section 6
Section 6 puts a duty on the Commission to review the national minimum wage annually and make recommendations to the Minister on any adjustment of the national minimum wage rate. Note that “any” adjustment means that the Commission can potentially recommend an increase (this is normally the case), a decrease, or no change, to the NMW rate per hour depending on the Commission’s findings in its review. The final decision is made by the Minister. NMW Act Section 7
Take note of Section 7. For the purpose of the annual review, the Commission must in general promote:
1.the medium-term targets referred to in section 11(d) (to set medium-term targets for the minimum wage rate)
2.the alleviation of poverty, and
3.the reduction of wage differentials and inequality. When considering increases, the Commission must consider the following economic factors:
1.inflation, the cost of living and the need to retain the value of the minimum wage
2.wage levels and collective bargaining outcomes
3.gross domestic product
4.productivity
5.ability of employers to carry on their businesses successfully
6.the operation of small, medium or micro-enterprises and new enterprises
7.the likely impact of the recommended adjustment on employment or the creation of employment, and
8.any other relevant factor. All the above are important economic factors, but arguably the seventh one is the most important – unemployment. National Minimum Wage Rates – Increases
In a welcome acknowledgement of the economic role that payrolls play , the National Minimum Wage Commission has again made the change to the minimum wage rates effective from 1 March to align them with the start of the tax year. Government Gazette No. 45882 issued on 7 February 2022 increases the National Minimum Wage rates that are specified in Schedule 1 and Schedule 2 of the National Minimum Wage Act with effect from 1 March 2022. Hourly Minimum Wage rates for the Four categories of workers other than Learners
NATIONAL MINIMUM WAGE
Rate/hour
Rate/hour
Rate/hour
Rate/hour
Worker Categories
1-Jan-19
1-Mar-20
%
1-Mar-21
%
1-Mar-22
%
1
General workers
20.00
20.76
3.8%
21.69
4.5%
23.19
6.9%
2
Farm workers
18.00
18.68
3.8%
21.69
16.1%
23.19
6.9%
3
Domestic workers
15.00
15.57
3.8%
19.09
22.6%
23.19
21.5%
4
Public Works Program workers
11.00
11.42
3.8%
11.93
4.5%
12.75
6.9%
Note that in terms of section 4(3), the minimum wage rate in respect of workers in the extended public works program must be increased proportionately to the adjustment of the national minimum wage for general workers. Increases to Sectoral Determinations
The increase to the NMW rate impacts on wage rates set in sectoral determinations that are higher than the NMW.

Comments Invited: Proposals regarding the National Minimum Wage Rates
The National Minimum Wage Commission is established by the National Minimum Wage Act and is mandated to every year investigate and measure the impact of the national minimum wage rates against a list of seven economic factors, of which employment (or unemployment) is arguably the most important. Following the annual investigation, the Commission prepares a report that includes a recommendation to either increase, leave unchanged, or reduce, the minimum wage rates for the following year, and submits it to Government for a final decision. The final adjusted national minimum wage rates are usually issued in late January or early February and at the request of the PAGSA at the inception of this process, are made effective from 1st March for the tax year that follows. The Commission has invited us to submit written representations on the effectiveness and impact of the national minimum wage for their consideration, taking into account the following medium-term target:
Please email your comments to [email protected] no later than 8 January 2023. Regards,
Rob Cooper
Chairman Payroll Authors Group of South Africa
All information provided by the PAGSA is subject to our DISCLAIMER.