Along with all the other responsibilities associated with tax management in South Africa, businesses are reminded of their PAYE (Pay as you Earn) obligations towards Sars - including the onus to issue IRP5 tax certificates to employees.
This is according to HR and tax legislation specialists at human capital management and HR solutions services provider, CRS Technologies.
Sandra Maritz, head of Legislation, says local companies have to understand and appreciate that there are serious repercussions for companies that don’t adhere to South Africa’s tax regulations.
“In order for Sars to assess the total tax liability due from an individual, they need to be informed of the accumulated income which the individual has received during a particular period, as well as the amount of the allowable deductions for this same period,” says Maritz.
“Generally employees are not informed of whether employers actually pay over the PAYE deducted from their remuneration to Sars. The reconciliation process is a way of determining that the PAYE deducted was actually paid to SARS,” she continues.
Maritz notes that the fourth schedule of the Income Tax Act obliges an employer to deduct or withhold PAYE from remuneration and then to pay the amounts deducted over to Sars within seven days after month end.
CRS Technologies advises that the process is quite complex and there is pressure on payroll practitioners to apply their skills, knowledge and experience to enforce PAYE regulations to employees’ earnings and deductions.
The company says that PAYE regulations and specifications are set up according to the Income Tax Act and is extremely complex.
“...[It] is a challenge to interpret correctly. The safest way to handle this is to entrust the tax year end obligations to a competent and professional payroll solutions and services company,” says Maritz.
South Africa’s detailed and complex tax legislation system demands a proactive approach by businesses.