The following is the News flash 2023/22 published by the PAGSA on July 13, 2023
regarding the Comments invited: Two-Pot Retirement System.

COMMENTS INVITED: DRAFT AMENDMENTS – TWO-POT RETIREMENT SYSTEM

Your comments on the draft Amendments Bill for the establishment of the ‘Two-pot Retirement System’ are invited.

The draft legislation is available on the National Treasury website.

One of the main issues for payrolls and employers is the proposed ‘split’ of the contribution to retirement funds at the option of the employee, and there are concerns regarding directives, UIF, and SDL.

Our comments must be submitted to National Treasury by COB on Saturday 15 July 2023 (this would be after the end of the rugby game …).

Apologies for this late request.

The following is the News flash 2023/23 published by the PAGSA on July 25, 2023 regarding the SARS Notice: Trade testing Directive system.

SARS NOTICE: TRADE TESTING OF THE TAX DIRECTIVE ENHANCEMENTS

SARS has enhanced their tax directive systems and issued a notice for employers and tax practitioners to assist with the testing of the changes.

As you can see from the notice below, the trade testing is scheduled to start on16 August 2023.

SARS NOTICE

Dear Stakeholder

TRADE TESTING DATES AND SOFTWARE IMPLEMENTATION: TAX DIRECTIVES

SARS will introduce enhancements to the Tax Directives process as indicated in the IBIR-006 Tax Directives Interface Specification Version 6.503. Trade testing is planned to start on Wednesday, 16 August 2023 to prepare for the implementation of the software during the second quarter of this financial year. If the dates need to change, SARS will communicate accordingly.

The Tax Directives Interface Specification is available on the SARS website www.sars.gov.za and you are encouraged to review it prior to testing.

Please follow these steps to submit test files:

Step 1: Before testing can commence, you will need to email 10 taxpayer reference numbers to [email protected] to ensure the numbers are active. In the email subject line, use “Tax reference numbers for Trade Testing”. A maximum of 10 taxpayer reference numbers will be allowed.

Step 2: You will be notified via the same email address to confirm when testing may commence.

For trade testing queries please email [email protected]

Sincerely

THE SOUTH AFRICAN REVENUE SERVICE
July 2023

The following is the News flash 2023/24 published by the PAGSA onAugust 9, 2023
regarding the SARS Notice: AA88 e@syFile changes.

SARS NOTICE: AA88 E@SYFILE ENHANCEMENTS

SARS has enhanced some of the AA88 functionality on the e@syFile software system and issued a notice.

The changes are listed in the SARS notice below.

SARS NOTICE

Dear Employer

Treatment of Defaulted Third•Party (AA88) Notiecs

In terms of section 179(1) of the Tax Administration Act, the South African Revenue Service (SARS) may issue a notice to any Third Party to pay funds over to SARS on behalf of a taxpayer to satisfy outstanding debt. The Third Party that receives this notice must pay the money in accordance with the notice, and any non-compliance will result in the third party being personally liable for the money.

SARS recently identified several technical issues affecting the Employer e@syFile system. This caused many Employers not to be notified of Third-Party (AA88s) appointment and default notices. As a result, Employers were incorrectly placed in a non-compliant (Default) status.

To remediate this, SARS has:
– applied fixes to the Employer e@syFile system in April 2023 and resolved these issues, and
– will only follow-up on Employer non-compliances (payment defaults) that arise on or after 1 July 2023.

Employers are also not required to process any AA88 notices issued on or prior to 1 May 2023 that have not yet been acted on. To determine this, verify that the issue date is prior to 1 May 2023. If the payment due date has passed, Employers are not required to act as the notice has been cancelled automatically. These notifications will be sent to Employer e@syFile system in due course.

These decisions applicable to all AA88 appointments delivered via Employer e@syFile system and PERSAL. This does not apply to Third-Party appointments delivered via SARS eFiling.

We apologise for any inconvenience.

THE SOUTH AFRICAN REVENUE SERVICE
July 2023

The following is the News flash 2023/25 published by the PAGSA on August 9, 2023 regarding the SARS Notice: e@syFile Beta testing notification.

SARS NOTICE: E@SYFILE BETA TESTING NOTIFICATION

SARS has issued a notice with regards to the planned BETA testing which will commence on 14 August 2023 and end on 6 September 2023.

Please book this testing period in your diary.

The SARS notice are included below.

SARS NOTICE

Dear Stakeholder

UPDATED e@syFileTM EMPLOYER BETA RELEASE AVAILABLE FOR TRADE TESTING

The South African Revenue Service (SARS) will again provide you an opportunity to test the updated e@syFile™ Employer build before the formal release in mid-September 2023 for the Employer Interim Reconciliation.

The updated e@syFile™ Employer BETA version with enhanced features for download will be released to you on 14 August 2023. The Business Requirements Specification: SARS_PAYE_BRS – PAYE Employer Reconciliation_V22.1.1 for the Employer Interim Reconciliation submission period 202308 is available on the SARS website www.sars.gov.za

During the testing period from 14 August 2023 to 6 September 2023, all online functionality will be disabled to prevent the incorrect submission of test data into the production environment. This means the application will default to offline mode. Certain menu options will also be disabled as a precautionary measure.

e@syFile Beta Enhancements will include:
• • Minor amendments to source code validations.
• • A separate read-only IRP5/IT3(a) certificate that can be issued to employees.

You will be provided with a link in a follow up letter which will allow you access for testing purposes. Please note that this link is confidential and only available to selected individuals. In order to maintain its confidentiality, please exercise caution and do not share it with others.

SARS will analyse the feedback from the external testers during the test cycle.

Your consolidated feedback should be sent daily to the nominated person.

SARS will use the feedback to determine the frequency at which updated versions of the test software will be released, where necessary.

Thank you for assisting SARS with the testing of the application.

THE SOUTH AFRICAN REVENUE SERVICE
July 2023

The following is the News flash 2023/19 published by the PAGSA on June 5, 2023
regarding the SARS RFI: Feedback on Adoption of API Technology.

SARS REQUEST FOR INFORMATION – API TECHNOLOGY FOR TAX CERTIFICATE SUBMISSIONS

Refer to PAGSA NF 2023-17 ‘Monthly Tax Certificates – Heads-up’ for background to the SARS intention to modernise the technical capability of their systems.

As far as payrolls and employers are concerned, this will result in the requirement to submit monthly tax certificates to SARS as opposed to the current bi-annual submission requirement.

On 22 May 2023 SARS issued a RFI (Request for Information) asking for feedback from PAGSA payroll supplier members on their ability and their appetite to introduce API (Application Program Interface) technology into their payroll systems as an alternative method of submitting tax certificates to SARS in the future.

The introduction to the SARS RFI reads as follows:

This Survey serves to determine the level of interest in the introduction of an Application Programming Interface (API) solution, in addition to SARS’ existing submission channels (i.e. e@syfile and eFiIing) for the submission of PAYE Monthly Data by all ISV’s who have indicated their interest in the development of an API channel for the submission of PAYE monthly data to SARS.

SARS requested a response from the PAGSA by 5 June 2023.

Unfortunately the questions in the RFI were focused on both payroll suppliers and on your clients (employers). Within the time frame, it was impossible for payroll members to request information from their clients that would no doubt require technical explanation, to analise the response and send the consolidated feedback to the PAGSA for on-sending to SARS.

A further complication was that the numbers of your clients was requested, which is confidential information.

After some discussions between the PAGSA and SARS, it was agreed to reduce the scope of the survey to include only the PAGSA payroll supplier members, and to limit the questions to the following:
1. As a payroll supplier member, if an API channel was made available, would your company make the necessary changes to your payroll system(s) to allow your clients to make use of the new submission channel option? Please answer ‘Yes’ or ‘No’ and add a short comment if you want to.
2. If your payroll system(s) made the API submission channel available in the future, estimate as best possible the percentage of your client base that you anticipate would make use of the new submission channel.

Can I ask that on behalf of your company, you URGENTLY submit your response to the above two questions by email directly to [email protected] for Rhona’s attention by no later than close of business Wednesday 7 June 2023.

The following is the News flash 2023/26 published by the PAGSA on August 17, 2023 regarding the SARS Notice: PAYE incorrect Admin Penalties.

SARS NOTICE: PAYE INCORRECT ADMIN PENALTIES

SARS has issued a notice indicating that several admin penalties were incorrectly issued in respect of PAYE and that this has now been corrected.

The SARS notice are included below.

SARS NOTICE

Dear Valued Stakeholders

Please be aware that SARS recently issued several admin penalties incorrectly in respect of PAYE.

This has already been corrected and the correction is reflected on the Statement of Account.

A formal cancellation notice will be issued in due course.

SARS apologises for the impact of this incorrect penalty being imposed.

THE SOUTH AFRICAN REVENUE SERVICE

The following is th News flash 2023/27 published by the PAGSA on August 17, 2023
regarding the e@syFile Beta testing (1st Phase).

E@SYFILE BETA TESTING (1ST PHASE)

SARS has issued a notice with regards to the testing of the updated e@syFile software (BETA version) application before its release to the general market in September 2023.

All online functionality has been disabled in order to prevent inadvertent submission of test data into SARS production environment, therefore, certain menu options have been disabled and the test application will default to offline mode as a fail-safe.

Testing should commence tomorrow 15 August 2023 and be concluded on 6 September 2023 after which the testing window will close.

The link: The BETA test version was released and the build can be downloaded from the following link: https://secure.offline.sarsefiling.co.za/PAGDownloadSite/BetaHome.xhtml.

Please note that this link is confidential and only available to PAGSA full members for testing purposes. In order to protect its confidential status, SARS request that you do not share this link.

The BRS: The PAYE BRS for the Employer Interim Reconciliation submission period 202308 is available on the SARS website: PAYE BRS V22.1.2

Username & Password: The username and password will be sent to you when an SMS with your company name is received on (072) 680 8337.

Error reporting: Email the following details of the error to [email protected]
1. Make your description of the problem as short as possible, but good enough for SARS to understand the problem.
2. Add screen prints where necessary of the error to the email.
3. Add the CSV file where the error relates to the information supplied in a CSV file.

The following is the News flash 2023/28 published by the PAGSA on August 17, 2023
regarding the COID: Maximum Earnings calculation.

COMPENSATION FUND – MAXIMUM EARNINGS CALCULATION

Background

For many years, the PAGSA has requested guidance from the Compensation Fund on how to calculate earnings up to the earnings threshold that is published annually by the Minister when calculating the totals required for the completion and submission of the Return of Earnings (ROE) annual form.

Gazette No. 48337 was published on 30 March 2023 with amongst other matters, an incorrect Earnings threshold for the coming year of assessment 2023/2024. One of the other matters included in this Gazette was a notice towards the end of the Gazette of “EXPLANATORY NOTES ON THE 2022 ROE SEASON”.

This was followed by the publication of Gazette No. 48673 on 30 May 2023 that corrected the Earnings threshold for 2023/2024 and included the same “EXPLANATORY NOTES ON THE 2022 ROE SEASON” notice.

Note that in the Fund’s terminology, ‘2022’ refers to the year in which March falls, not the year in which February falls, as is the case with tax terminology conventions.

This “Explanatory Notes” notice was therefore referring to the 2022/2023 year of assessment that by then had already ended on 28 February 2023 and in respect of which payrolls and employers had already calculated earnings up to the earnings threshold of R529 264 for 2022/2023.

Explanatory Notes on the 2022 ROE Season

Amongst other matters, the “EXPLANATORY NOTES ON THE 2022 ROE SEASON” notice included a ‘Maximum Earnings’ section that stated as follows.

Maximum Earnings
A Maximum Earnings is applied annually at the end of the assessment period (28 February 2023) to the individual employee’s annual total earnings, not per month.
Full annual maximum earnings of R529 264.00 will apply irrespective of the number of months the employee was employed in the 2022 ROE Season.

Examples:
a) If an employee has earned total annual earnings of R600 000.00 from the employer during the period as stated above, the amount should be capped at R529 264.00 and be declared as such.
b) If an employee has earned total annual earnings of any amount below R529 264.00, the total annual earnings that must be declared is the total annual earnings amount as earned by the employee, regardless of whether the said employee worked for a full year or a part of the year.

Notification

To the best of my knowledge, this ‘Maximum Earnings’ section was published in these two Gazettes without any discussion with, or notification to, any employment organisation.

There was certainly no discussion with, or notice given to, the PAGSA, who after all has as its members the payroll supplier companies that must apply this calculation in their payroll systems.

Matters Arising from the Notice of ‘Maximum Earnings’

Effective Date
The “Explanatory Notes” notice does not specifically state an effective date, but the heading refers to ‘2022’, and in its wording, the calculation clearly refers to the year of assessment that had just ended (28 February 2023) as well as specifying the annual earnings threshold for the 2022/2023 year (R529 264).
This wording creates the impression that this calculation method must only be used for the 2022/2023 year of assessment, and not for future years. This creates uncertainty as far as implementation is concerned – see the ‘Joint Approach’ sub-section at the end of this newsflash.
Note that once it is made effective, the COID Amendment Act replaces the concept of ‘earnings’ with the Fourth Schedule definition of remuneration (with some exclusions).
The reference in the notice to only the 2022/2023 year of assessment might be because the Fund intends to issue a new ‘Maximum Earnings’ calculation of remuneration rather than earnings from the effective date of the COID Amendment Act that has not yet been announced.

Number of Employees
Besides the fact that the notice was published too late for payroll suppliers to apply the specified calculation of ‘Maximum Earnings’ for the 2022/2023 year of assessment in their payroll systems, it did not specify how the ‘Number
of Employees’ must be calculated.
Employers must complete the ‘Number of Employees’ field per month on the annual Return of Earnings form, therefore payrolls must calculate these totals for the year of assessment to assist the employer to complete and submit the ROE
accurately.
If an employee works every month of the year of assessment for the same employer, the number of months that this employee works for the employer is an easy calculation. It follows that calculating the total number of such employees
per month for the employer for the ROE form is also an easy matter.
However, it is not clear how to report the number of months for employees who did not work the full year of assessment for the same employer.
In particular, the calculation is not an easy one for what we refer to as ‘broken periods of employment’, being the working periods of casual workers, seasonal workers, and workers provided by a Temporary Employment Service (TES) to a client-employer, who don’t provide services every month to an employer.
The PAGSA has queried the calculation of the number of employees with the Fund by submitting examples of different methods of counting the number of months of those employees who did not work every month during the year of assessment for the same employer and asked for clarification of this calculation.
Note the calculation of the ‘Number of Employees’ has nothing to do with the changeover in the future from ‘earnings’ to ‘remuneration’ in terms of the COID Amendment Act.

Audits of the 2022/2023 Return of Earnings
Soon after the publication of Gazette No. 48673 on 30 May 2023, the PAGSA received reports from our members that an external company, presumably appointed by the fund, was auditing employers, and raising penalties and interest on calculations of the ‘Maximum Earnings’ in respect of the 2022/2023 year of assessment that were not aligned with the ‘Maximum Earnings’ calculation method specified in the Gazettes.
As stated above, payroll systems and employers had already calculated the ‘Maximum Earnings’ before the two Gazettes that specified the method of calculation were published.
Our concerns were brough to the Fund’s attention but there has been no response, which is unusual.

State Law Advisers – Legal Opinion
Fairly recently, the PAGSA was sent a copy of this legal opinion by the State Law Advisers by a third party (i.e., not by the Fund). Until then we were not aware of its existence, and as far as I know, it was never issued in the public domain.
This opinion is dated 4 April 2019, and supports the method of calculating the ‘Maximum Earnings’ discussed above.
From this, I can only assume that at some stage between 4 April 2019 and early 2023, the Fund agreed with this opinion and decided to implement it retrospectively for the 2022/2023 year of assessment without discussion or notice.

Steps Taken by the PAGSA

Queries on the Application of the COID Amendment Act
In our comments dated 8 th May 2023, the PAGSA requested feedback from the Fund on some practical implementation aspects of the COID Amendment Act once it is given an effective date, including confirmation:
1. That payrolls must replace the concept of ‘earnings’ with the Fourth Schedule definition of remuneration (with some exclusions) for the purposes of the ROE form and assessment by the Fund. Note that while the answer to this is clear in the legislation, we asked for confirmation because of contradictory opinions in circulation.
2. That the ‘year of assessment’ for the purpose of the Return of Earnings will remain a ‘1 March to 28 February’ year despite the specification in the COID Act of a ‘1 April to 31 March’ financial year. Despite the fact that section 82 clearly specifies a ‘1 March to end of February’ year of assessment for ‘ROE’ reporting and that there is no reference to a “financial year” in section 82, there are contradictory opinions on this issue.

In addition to the above, we have in the past requested that, because of the replacement of ‘earnings’ with Fourth Schedule remuneration, the effective date (at least for this portion of the COID Amendment Act), is made effective from the start of a tax year (i.e., the 1st of March of a year).

To date we have not yet received a response from the Fund, which again is unusual.

Queries on the Implementation of the ‘Maximum Earnings’ Calculation
The PAGSA has queried the implementation of the ‘Maximum Earnings’ calculation several times, pointing out the impossibility of payrolls applying a specified calculation to a year of assessment that has already ended.
We have also requested that any penalties and interest that have been raised are reversed. Our concerns were politely acknowledged, but without any meaningful response.

Joint Approach
The lack of response by the Fund resulted in the PAGSA joining forces with organisations in labour circles to jointly approach the Compensation Fund and the DoEL. This process is ongoing, and is focusing on:
1. Determining the legal status of the “EXPLANATORY NOTES ON THE 2022 ROE SEASON” notice
2. Questioning whether the intention that the ‘Maximum Earnings’ calculation specified in the notice should be applied for the 2022/2023 year of assessment is reasonable in practical application terms.
3. Determining whether or not the ‘Maximum Earnings’ calculation as specified in the notice must be applied for the 2023/2024 year of assessment and for future years of assessment.
4. Clarification of the calculation of the ‘Number of Employees’ that must be reported on the ROE form if an employee does not work every month of the year of assessment for the same employer.
5. Requesting that the penalties and interest that have already been raised in respect of the 2022/2023 year of assessment are retracted and that the audits are stopped.
6. Discussion and response to the practical concerns raised by the PAGSA in our comments submitted to the Fund regarding the implementation of the COID Amendment Act.

Based on the experience of the recent past, I don’t expect a speedy resolution to the above issues, so the question now is how to proceed.

My (Rob Cooper) personal guidance:
1. If penalties and interest have been raised for the 2022/2023 year of assessment because the calculation used was not aligned with the ‘Maximum Earnings’ calculation as specified in the Gazettes, consider appealing this action, and if justifiable, approaching the courts.
In this regard, if your company has been penalised, you are welcome to contact the PAGSA who can put you in contact with an organisation that will take this forward on your behalf.
Any reasonable person should agree that one cannot implement a requirement at a point in time if the requirement was not known at that time.
2. Consider applying the ‘Maximum Earnings’ calculation as specified in the Gazettes for the 2023/2024 year of assessment in your payroll system until we get clarity on the way forward.

It appears certain that the Fund’s intention is that an ‘annual’, as opposed to a ‘monthly’, calculation of ‘Maximum Earnings’ should be applied, and that this ‘annual’ calculation principle will be retained when we move away from the concept of ‘earnings’ to the Fourth Schedule definition of ‘remuneration’ when the COID Amendment Act is made effective at some stage in the future.

To repeat, this is my (Rob Cooper) personal guidance, and you would be wise to seek other advice in addition to mine.

Regards,
Rob Cooper

The following is the News flash 2023/29 published by the PAGSA on August 20, 2023
regarding the SARS Notice: External Debt Collectors.

SARS NOTICE: EXTERNAL DEBT COLLECTORS – HANDOVER

SARS has issued a notice with regards to the appointment of external debt collectors who will be actioned to collect debt on overdue accounts.

SARS NOTICE

Dear Tax Practitioners,

Notice of possible taxpayer handover to external debt collectors

The South African Revenue Service (SARS) has started the process to notify taxpayers with outstanding debt of older than 5 years of its’ intent to hand them over to external third-party debt collectors from October 2023.

These debt collectors will assist with overdue accounts where taxpayers have been repeatedly contacted, sent letters of demand detailing options for debt resolution, but have failed to settle their accounts or formalise payment arrangements with SARS.

Taxpayers who receive a notification from SARS and fail to make payment arrangements or settle their debt immediately will be notified via letter that their debt has been handed over to SARS appointed debt collectors.

SARS has assigned dedicated consultants to help affected taxpayers with handover-related questions through a dedicated mailbox. Taxpayers can use SARS eFiling/MobiApp to request a payment arrangement.

Sincerely,

THE SOUTH AFRICAN REVENUE SERVICE
August 2023

The following is th News flash 2023/30 published by the PAGSA on August 20, 2023
regarding the Comments invited: Draft Tax Amendment Bills.

COMMENTS INVITED: DRAFT TAX AMENDMENT BILLS

The following draft Tax Amendment Bills were issued on 31 July 2023 (a bit later than usual this year):
1. Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (2023 draft Rates Bill)
2. Draft Taxation Laws Amendment Bill (2023 draft TLAB)
3. Draft Tax Administration Laws Amendment Bill (2023 draft TALAB).

In addition to these Bills, changes to various regulations were also issued but these are not of importance for payroll suppliers and payroll offices.

Your comments on the draft Tax Amendments Bills are invited.

The PAGSA will be submitting comments on these Tax Amendment Bills by 31 August 2023, and would appreciate your input by no later than 25 August 2023 to give us time to prepare our submission.

The draft legislation is available on both the SARS and the National Treasury websites.

Apologies for this late request.