SARS issues tax alert for employers in South Africa – with a warning

 ·25 Apr 2024

The South African Revenue Service (SARS) has issued an alert reminding employers that the Employer Annual Reconciliation period is currently open and will close at the end of May 2024.

Employers in South Africa are obligated to deduct and declare the correct amount of tax from their employee’s remuneration each month and pay this over to SARS.

During the reconciliation period, employers must submit the reconciliation forms (EMP501), which must include the latest and most accurate payroll information regarding their employees and the tax they have deducted, covering the full tax year from 1 March 2023 to 29 February 2024.

“The employer’s annual reconciliation must be submitted by 31 May 2024, so that employees’ auto-assessments and tax returns can be prepared accurately,” SARS said.

The EMP501 must include:

  • Monthly Employer declarations (EMP201) for PAYE, Unemployment Insurance Fund contributions (UIF), and the Skills Development Levy.
  • Information about payments made (excluding penalties and interest paid).
  • Employee tax certificates (IRP5/IT3[a] generated) covering the tax year from 1 March 2023 to 29 February 2024.

More information can be found here.

SARS warned that it would be coming after employers who fail their tax obligations.

“(SARS wants) to make tax non-compliance hard and costly through, where necessary, hard enforcement—for example, court action, asset seizure, and criminal prosecution,” it said.

“Failure by an employer to comply with its obligations harms not only that employer and the fiscus but also employees. SARS vigorously pursues employers that fail to comply.”

The taxman said that submitting an incomplete EMP501 or submitting an EMP501 after the due date will result in administrative penalties, amounting to 1% of the year’s PAYE liability.

This penalty increases by 1% monthly, reaching up to 10% of the year’s PAYE liability.

It is a criminal offence for an Employer wilfully or negligently to:

  • Fail to submit full and complete EMP201 or EMP501 returns to SARS by the due date.
  • Fail to issue an IRP5 or IT3(a) certificate to an employee within the specified periods.
  • Fail to deduct or withhold PAYE or UIF, or not to pay any PAYE or UIF deducted or withheld over to SARS as required by law.
  • Use or apply PAYE deducted or withheld for any purpose other than to pay that amount to SARS.

“Any person found guilty of one of these offences is liable, on conviction, to a fine or imprisonment for up to two years,” SARS said.

Other May tax deadline

In addition to employer reconciliation, the annual third-party (IT3) data submission season will also be closing on 31 May.

IT3 reporting sees third parties, such as medical aid schemes, employers and banks, sending SARS certain prescribed data called “third party data.”

The data is sent to SARS in the form of tax certificates, which SARS then uses in their assessments of various taxpayers.

These certificates differ per industry, with medical aid schemes submitting medical aid tax certifications, while employers will submit IRP5 tax certificates.

Notably, for the first time in South Africa, Section 18A-approved PBOs have now been added to the list of third parties required to submit third-party data to SARS through the submission of IT3(d) tax certificates.

For taxpayers, donations made to section 18A-approved organisations are one of the ways that South Africans can lower their tax bill – limited to 10% of a taxpayer’s income.

Read: SARS is coming down hard on taxpayers – but there’s some good news for trusts

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