SARS PAYE Business Requirement Specification (BRS) – PAYE Employer Reconciliation_V23-0-0

This document specifies the requirements for the generation of an import tax file for the yearly as well as the interim submission. The requirements as defined in this version of the BRS will become effective from 1 March 2024 for Payroll Suppliers until replaced by an updated version. The changes will be implemented on the SARS systems in September 2024

GENERAL RULES FOR IMPORT FILE STRUCTURE
a. The record structure of the import file is as follows:
• Employer demographic header record
• Employee demographic, financial and ETI information records for all tax certificates
• Employer totals trailer record.

b. Each import file must only contain information for one employer.

c. The import file for an employer must contain the tax certificates of employees with a ‘year of assessment’ equal to or prior to the ‘transaction year’.
d. Any certificates for prior transaction years must comply with the rules as defined in this version of the BRS.

e. IRP5/IT3(a) and ITREG certificate type records may not be combined into one submission file. ITREG certificate type records must be included in a separate file since the transaction year may not be completed if the certificate type is ITREG.

f. The format of all codes in the import file must be code, information (e.g. 3015,”IRP5”) OR code, value (e.g. 3240,2) OR code, amount (e.g. 3601,5000 or 4102,500.00)
g. No amounts must be reported as a negative value

h. No field must contain a comma (,) or a pipe (|) in the value / amount
i. A field that has a zero value must not be completed, except if specified otherwise in the field validation rules

j. The cents for all Rand amounts must be dropped off/omitted (rounded down) except for codes 4101, 4102, 4115, 4141, 4142, 4149, 4116, 4118, 4120, 6030, 7002, 7003, 7004 and
7008 where the Rand value including the cents must be specified (even if it is zero).
k. The format for all dates must be either CCYYMMDD or CCYYMM or CCYY

l. All Alpha, AlphaNumeric and Free Text fields (indicated with ‘A’, ‘AN’ and ‘FT’ respectively in File Layout below) must be contained in opening and closing double quotation marks, e .g. the surname of Horn must be shown as 3030,”Horn”

m. Data fields cannot start with a space

n. To reduce the volume of data, the number of income source codes is restricted to 20, and the number of employee and employer deduction codes is restricted to 12. To make this possible, certain source codes have been specified as ‘sub -codes’ and their values must be consolidated into a ‘main’ source code on the certificate. The rules for consolidation of sub – codes into main codes can be obtained in section 6 of this document. Sub-codes may be held within the payroll system but must not be written to the import file or printed on tax certificates.
o. The monthly ETI data must be added to the end of the tax certificate information for every employee that qualifies for ETI. ETI data must be reported for all months in the reconciliation period. For the interim bi-annual submission, 6 months of ETI data (from March until August) must be reported, and for the final submission, 12 months of ETI data (from March until February) must be reported. The ETI data must be reported in the following manner:

• If the employee does not qualify for ETI in terms of the ETI Act (Employment Tax Incentive Indicator = N) in the reconciliation period, then the ETI fields must not be completed
• If the employee qualifies for ETI in terms of the ETI Act (Employment Tax Incentive Indicator = Y) for one or more months in the reconciliation period, then all ETI codes and
values must be completed for all the months in the reconciliation period as per the validation rules for each code
Note: No ETI related fields must be printed on the IRP5 certificate that is issued to the employee

p. Tax certificates require at least one income code with a value greater than zero, except for remuneration in respect of code 3615 which may be zero.

SARS PAYE Business Requirement Specification (BRS) – PAYE Employer Reconciliation_V23-0-0

This document specifies the requirements for the generation of an import tax file for the yearly as well as the interim submission. The requirements as defined in this version of the BRS will become effective from 1 March 2024 for Payroll Suppliers until replaced by an updated version. The changes will be implemented on the SARS systems in September 2024

INTRODUCTION
As part of its drive for better service, SARS has been modernising tax processes since 2007. Changes introduced are a vital part of SARS’s long-term vision to have a more accurate reconciliation process. The more information at SARS’s disposal means a less cumbersome tax process, as returns/declarations are increasingly pre-populated.

The Employers Reconciliation Declaration (EMP501) has always been an important part of the year of assessment for employers, when submitting their annual reconciliations for the period 1 March to 28/29 February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF). While the annual reconciliation declaration will still be required for the full year of assessment ending February, the interim reconciliation has now become an integral part of the Employer Reconciliation.

The first Interim Reconciliation submission, for a six month period, took place from 1 September to 29 October 2010. During the Interim Reconciliation employers are required to submit accurate reconciliation declarations for the six month transaction period 1 March to 31 August, in respect of the Monthly Employer Declarations (EMP201) submitted, the payments made, and the interim Employee Income Tax Certificates [IRP5/IT3(a)] created, where applicable.

These submissions can be made via one of the following channels:
• Manual – complete the relevant tax certificates (max 50 certificates) and EMP501 return on the specified forms on eFiling, and submit electronically to SARS or visit a SARS Branch for assistance
• Electronic – Generate a tax certificate file from the payroll system and import this file into e@syFileTM Employer. Within e@syFileTM Employer, capture additional manual certificates, cancel certificates, capture EMP501 details, and submit to SARS via the eFiling online channel.
• If the employer has 50 or less IRP5/IT3(a) certificates, a tax certificate file can be generated from the payroll system and this file can be imported into eFiling. Any amendments to, or cancellation of, or capturing of certificates can be done in eFiling if the total number of certificates does not exceed 50.

The reconciliation and submission of the EMP501 return and tax certificates to SARS must take place within the dates announced from year to year as the employer’s filing season. Failure to do so may result in penalties and interest.

For information on the completion of manual certificates, please consult the guide s e@syFileTM Employer User Guide or A Step-by-Step Guide to the Employer Reconciliation Process on the SARS website.

The Taxation Laws Amendment Act, Tax Administration Laws Amendment Act, and Rates and Monetary Amounts and Amendment of Revenue Laws Act are the main tax amendment Acts for the 2022/23 tax year. These Acts were promulgated on 19 January 2022 and contain various changes to tax-related legislation.

Two changes not discussed in this newsflash are the extension to the reduction of the value of the ‘long services award’ and the change to the definition of ‘monthly remuneration’ in the Employment Tax Incentive Act. These changes are still under discussion, and more information will be provided once final clarity is obtained.

One of the general employment-related tax amendments relates to the fringe benefit for employer contributions to a retirement fund. Previously, employer-paid contributions to a retirement fund resulted in a taxable fringe benefit for employees. However, there was an anomaly when a retirement fund provided both defined contribution component retirement benefits and self-insured risk benefits. This resulted in the classification of the total contribution to the fund as a defined benefit component and the fund as a defined benefit fund. The fringe benefit was calculated using a prescribed formula.

To address this anomaly, the definitions in the Seventh Schedule paragraph 12D(1) have been amended. The changes include the definition of a ‘risk benefit’ and a ‘risk benefit policy’, as well as specifying that a defined contribution component can result from a risk benefit provided by a policy of insurance or a risk benefit policy. As a result, a retirement fund that provides both defined contribution component retirement benefits and self-insured risk benefits is now classified as a defined contribution fund. The fringe benefit is equal to the total employer-paid contribution, and the value of the risk premiums under self-insured risk benefits is determined based on the actual contribution made by the employer. These changes are effective from 1 March 2022.

Another tax amendment relates to the extension of the learnership tax incentive ‘sunset date’. The learnership tax incentive provides employers with an additional tax deduction for vocational training through formal learnership contracts. The incentive was introduced in 2001 and had a sunset date of 1 October 2011. However, it was extended to 1 October 2016 after a review showed its effectiveness. Another review conducted in 2016 recommended extending the incentive sunset date to 1 April 2022 and improving the targeting of the incentive. The completion of the SARS IT180 form was made compulsory for taxpayers to claim the learnership tax incentive.

SARS Message: Deceased Employee’s Tax Certificate Issue Period

SARS, the South African Revenue Service, has recently released a message regarding the issuing of tax certificates for deceased employees. It is important for employers to take note of this information, as it has implications for the timely completion of tax-related tasks.

When an employee passes away, their tax period ends on the date of death. As a result, it is crucial that a tax certificate is issued within 14 days after the date of death. This requirement is in place to facilitate the executor of the deceased employee’s estate in finalizing the necessary tax-related matters.

The executor of an estate has various responsibilities, one of which is completing the tax returns of the deceased individual up until the date of their death. By issuing the tax certificate promptly, the executor can fulfill this duty and ensure that the estate’s tax affairs are in order.

It is important for employers to adhere to this requirement set by SARS. Failure to issue the tax certificate within the specified timeframe may result in delays and complications in the estate administration process. Additionally, non-compliance with SARS regulations can lead to penalties and other legal consequences.

Employers should be aware that this message from SARS serves as a reminder and guideline for the timely issuance of tax certificates for deceased employees. It is crucial to consult the official SARS website for any updates or changes to this requirement.

In conclusion, employers must issue tax certificates for deceased employees within 14 days after the date of death. This is necessary to facilitate the executor in completing the deceased individual’s tax returns and finalizing the estate’s tax affairs. Failure to comply with this requirement may result in delays and penalties. For further information and updates, it is recommended to refer to the official SARS website.

SARS ETI Verification Audit

The South African Revenue Service (SARS) is currently conducting audits to verify Employment Tax Incentive (ETI) claims made by employers. If your return(s) for the tax period 201908 have been selected for verification, SARS has issued a general letter requesting certain records to be submitted.

To ensure a smooth verification process, employers are advised to review their EMP201 return(s) against their relevant payroll calculations and materials. If any errors are detected, they can be corrected by submitting a revised EMP501 reconciliation via eFiling or e@syFile.

For the tax period(s) under verification, the following relevant material should be submitted if no errors are detected:

1. Payroll or summary report for the period
2. A schedule of the employment tax incentive calculations per employee, including their names, ID numbers, age, number of hours worked for the month, remuneration, and the ETI calculation for the period under verification.
3. If any employees earned below R2000 per month, the employer should provide the bargaining council and industry regulations and agreements that allowed them to remunerate the employee for less than R2000.
4. Proof that the employer is subject to sector determination or bound by a bargaining council agreement which prescribed a lesser minimum salary than R2000.

It is important to note that the payroll data used for submitting employees’ tax certificates already contains most of the above-mentioned information, except for the “wage regulating measures,” if any.

To facilitate the verification process, employers are advised to submit the tax certificate information available on their payroll file. Specifically, the following codes should be provided:

– Code 3030: Surname
– Code 3040: Names
– Code 3060: ID number
– Code 3066: Asylum seeker permit number
– Code 3080: Date of birth
– Code 3190: ETI employment date
– Code 7006: ETI month
– Code 7005: ETI qualifying month cycle
– Code 7009: ETI SEZ code
– Code 7007: ETI hours
– Code 7002: ETI remuneration
– Code 7003: Minimum wage applicable
– Code 7008: Wage paid
– Code 7004: Calculated ETI

The above-mentioned information is sufficient for SARS to perform the verification process.

Please note that although the “age” is specifically requested, it can be determined using the “Date of Birth” information.

If you have any further questions or concerns, please refer to Rhona van Taak, the Admin Manager of the Payroll Authors Group of South Africa (PAGSA).

Please keep in mind that all information provided by PAGSA is subject to their DISCLAIMER.

SARS Notice: Employer Filing Season

The South African Revenue Service (SARS) has issued a notice regarding the employer filing season for the interim period ending August 2022. This notice provides important information for employers and stakeholders.

In preparation for the opening of the Employer Interim Reconciliation Filing Season on 19 September 2022, it is important to note that the prepopulated liabilities reflected on the Reconciliation Declaration (EMP501) during the period 14 to 16 September 2022 may not be complete. This will only impact employers who had a Revised Declaration (EMP201) processed during this period for a month within the relevant EMP501 reconciliation period.

If you are an affected employer, it is advised that you submit the Reconciliation Declaration (EMP501) starting from Monday, 19 September 2022. This will ensure that your filing is complete and accurate.

It is important for employers to comply with the filing requirements during the employer filing season. Failure to do so may result in penalties or other consequences. By submitting the Reconciliation Declaration (EMP501), employers are providing SARS with important information regarding their employees’ tax and other related matters.

The Employer Interim Reconciliation Filing Season is an opportunity for employers to reconcile and submit their employee tax certificates, as well as to declare and pay any outstanding liabilities. This process helps to ensure that employees’ tax affairs are in order and that the correct amount of tax is paid to SARS.

During the filing season, employers are required to submit the following documents:

1. Reconciliation Declaration (EMP501): This form is used to reconcile the amounts declared on the monthly Employer Declarations (EMP201) with the amounts reflected on the employee tax certificates (IRP5/IT3(a)).

2. Employee Tax Certificates (IRP5/IT3(a)): These certificates provide details of the employees’ earnings, deductions, and tax paid during the tax year.

3. Payment Advice (EMP201): This document is used to declare and pay any outstanding liabilities to SARS.

It is important to note that the filing season has specific deadlines that must be adhered to. Failure to meet these deadlines may result in penalties or other consequences. Employers should ensure that they have all the necessary information and documents ready before the filing season opens.

In conclusion, the SARS Notice regarding the employer filing season provides important information for employers and stakeholders. It highlights the need for affected employers to submit their Reconciliation Declaration (EMP501) starting from 19 September 2022 if they had a Revised Declaration (EMP201) processed during the period of 14 to 16 September 2022. Employers are reminded of the importance of complying with the filing requirements and meeting the deadlines during the filing season. By doing so, employers can ensure that their employees’ tax affairs are in order and that the correct amount of tax is paid to SARS.

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 formulas that increase the value of the ETI amount by up to 50%, effective from 1 March 2022.

Background:
The State President announced in the State of the Nation Address in February 2022 that the value and criteria for participation in the Employment Tax Incentive (ETI) would be increased to encourage hiring by smaller businesses, particularly of young people. The intention to change three areas of the ETI Act was highlighted in the announcement.

2022 Budget Review:
The 2022 Budget Review implemented the increase in the value of the ETI by including the new calculation formulas in the draft Rates Bill and making them effective from 1 March 2022. The Minister of Finance has the authority to propose changes to the ETI Act in the Budget Review, with an effective date of up to 12 months from the proposed date.

Change to the ETI Calculation Formulas:
However, an error was discovered in the initial Rates Bill issued on 23 February 2022, where the percentages in the formula for the “R4,500 to R6,500” bracket were not increased by 50% as intended. This error was corrected in the revised Rates Bill issued on 25 February 2022. The correct formulae are now in effect from 1 March 2022.

Old ETI Calculation Formulas (up to 28 February 2022):
– Monthly Remuneration: R0 to R1,999.99
– First 12 Months: 50% of Monthly Remuneration
– Second 12 Months: 25% of Monthly Remuneration
– Monthly Remuneration: R2,000 to R4,499.99
– First 12 Months: R1,000.00
– Second 12 Months: R500
– Monthly Remuneration: R4,500 to R6,499.99
– First 12 Months: R1,000 – (50% x (monthly remuneration – R4,500))
– Second 12 Months: R500 – (25% x (monthly remuneration – R4,500))

New ETI Calculation Formulas (from 1 March 2022):
– Monthly Remuneration: R0 to R1,999.99
– First 12 Months: 75% of Monthly Remuneration
– Second 12 Months: 37.5% of Monthly Remuneration
– Monthly Remuneration: R2,000 to R4,499.99
– First 12 Months: R1,500.00
– Second 12 Months: R750
– Monthly Remuneration: R4,500 to R6,499.99
– First 12 Months: R1,500 – (75% x (monthly remuneration – R4,500))
– Second 12 Months: R750 – (37.5% x (monthly remuneration – R4,500))

Tax Certificate Reporting:
The PAYE BRS version 21.0.0 provides the rules for tax certificate submissions by payrolls for the 2023 tax year. SARS will update the validation rules in the BRS for the monthly ETI fields to accommodate the increased ETI values resulting from the new formulas.

Importance of the ETI Formula Changes:
The changes to the ETI formulas, along with changes to the definition of “monthly remuneration” in the ETI Act, were released in a rushed manner, leaving payroll suppliers with limited time to implement the changes before the first ETI calculation runs for March. Delays in implementing the new formulas may cause issues with tax year submissions.

Still to be resolved:
There are two issues that require interpretation by SARS resulting from the changes made to the definition of “monthly remuneration” in the ETI Act. These issues relate to the exclusion of fringe benefits from ETI monthly remuneration and the application of BCEA section 34(1)(b) deductions to ETI monthly remuneration. Formal interpretations from SARS are awaited.

to the definition of an “employee” in the Employment Tax Incentive Act (ETI Act) to address the issue of “ETI schemes”. These schemes involve the recruitment of eligible participants by a recruitment agency and their employment by a participating employer for a fixed term period. The participants are then trained by a training institution, with the participating employer paying the remuneration stated in the participant’s contract to the training institution instead of directly to the participant. In some cases, the participants are also utilized by an independent company for work-based exercises and activities.

To curb the abuse of ETI schemes, the amendments to the ETI Act clarify that the substance of the employment relationship will be considered, rather than just the legal form. The work must be performed in accordance with an employment contract and the employee must be documented in the employer’s records as required by the Basic Conditions of Employment Act. Additionally, the employee must receive cash remuneration from the employer in exchange for their services.

These amendments were made in response to the growing concern over taxpayers using training institutions to claim the ETI for students. By specifying the requirements for claiming the ETI, the amendments aim to prevent the misuse of the incentive and ensure that it is used as intended – to encourage employers to hire young people and subsidize their wage costs.

The changes to the ETI Act were finalized in October/November 2021 by the Standing Committee on Finance and published in the Taxation Laws Amendment Act (TLAA) on 19 January 2022. The effective date of these amendments is 1 March 2022.

It is important for employers and payroll suppliers to accurately calculate the monthly remuneration for ETI purposes. Incorrect calculations can result in an incorrect reduction of the employer’s PAYE liability. The Payroll Authors Group of South Africa (PAGSA) has worked closely with the South African Revenue Service (SARS) to provide guidance on the calculation of ETI monthly remuneration. A Non-Binding Private Opinion (NBPO) was issued by SARS on 7 March 2022, and an example of the calculation of ETI monthly remuneration has been included in this newsflash as guidance for payroll suppliers.

The challenges faced by payroll suppliers in implementing the new ETI requirements in a timely manner have been communicated to SARS by PAGSA. The limited time between the publication of the TLAA and the effective date of the amendments has put pressure on all parties involved.

In conclusion, the amendments to the ETI Act aim to curb the abuse of ETI schemes by specifying the requirements for claiming the incentive. Employers and payroll suppliers should ensure that they accurately calculate the monthly remuneration for ETI purposes to avoid any incorrect reduction of PAYE liability. The guidance provided by PAGSA and the NBPO issued by SARS can assist in this process.

SARS Income Tax Return Notice – Filing Season

The South African Revenue Service (SARS) has issued a notice regarding the filing of income tax returns. This notice, titled “Returns to be submitted by persons in terms of Section 25 of the Tax Administration Act, 2011,” is expected to be published in the Government Gazette on 3 June 2022.

Key Points:

1. Individuals with a single source of income:
– If you received remuneration from only one source and have no other allowances or benefits, you are required to submit an income tax return if your total remuneration does not exceed R500,000 and PAYE (Pay As You Earn) has been deducted according to the prescribed tax deduction tables.

2. Submission Deadlines:
– If you are not a provisional taxpayer, your income tax return must be submitted before or on 24 October 2022.
– If you are a provisional taxpayer and use the eFiling platform, your income tax return must be submitted before or on 23 January 2023.

Please note that the above points are a summary of the notice. For the full details, please refer to the attached notice.

Disclaimer:
All information provided by the Payroll Authors Group of South Africa (PAGSA) is subject to our disclaimer.

Reference:
SARS Income Tax Return Notice – Filing Season (to be published in the Government Gazette on 3 June 2022)

Curbing ETI Abuse – Relaxation of Confidentiality

The Payroll Authors Group of South Africa (PAGSA) is responsible for communicating changes to payroll-related legislation and regulations to its members. These changes may require returns to be made or taxes to be withheld. PAGSA also provides interpretations and opinions on the law by partnering with statutory bodies such as the Employment Equity Directorate, the Unemployment Insurance Fund, the Compensation Fund, and SARS.

In order to protect the confidentiality of this information, PAGSA has historically restricted access to its newsflashes to PAGSA members and the aforementioned statutory bodies. However, due to the complexity of recent changes to the Employment Tax Incentive Act (ETI) aimed at curbing abuse, PAGSA has decided to relax the confidentiality requirement for one specific newsflash (2022-15).

This means that PAGSA members can now directly share the contents of newsflash 2022-15 with their clients, ensuring a consistent message is delivered to employers. This will also help prevent any errors that may arise from rewording the original newsflash.

It is important to note that while sharing the newsflash with clients is permitted, the PAGSA must be acknowledged as the author of the document. Additionally, clients should be instructed not to distribute the information beyond their own business.

If clients have any queries regarding the new ETI requirements, they should first contact their PAGSA member. If the member is unable to resolve the query, then it can be raised with the PAGSA. Clients should not contact the PAGSA directly.

It is possible that unexpected problems may arise as the implementation of this complex legislation progresses. If such issues arise, PAGSA will communicate with its members through newsflashes.

Please note that all information provided by the PAGSA is subject to the organization’s disclaimer.

Regards,
Rob Cooper
Chairman, Payroll Authors Group of South Africa