Employee’s tax (PAYE) is the amount withheld by an Employer from an Employee’s remuneration on a regular basis (usually weekly or monthly) and paid across to the South African Revenue Service (Sars) on behalf of that employee.
Every employer who pays remuneration which includes salaries, wages, commission, allowances etc., is required to be registered as an employer with Sars and is responsible for deducting the correct amount of PAYE from the employee and paying it across to Sars within seven days of the month end.
Please note that a sole proprietor who has no employees need not register for PAYE. However, a Close Corporation, Company or Trust with employees must register. Directors of Companies and Members of Close Corporations that are paid a regular remuneration are considered to be employees and deemed PAYE calculated on their remuneration must be paid across to Sars.
In order to register with Sars as an employer, one is required to complete an application form called an EMP101e, which can be downloaded from the SARS website.
Once registered, it is required that you submit a monthly EMP201 form to Sars reflecting related PAYE deductions made on behalf of employees and pay the amount across to Sars by the due date.
Failure to submit the returns on time or pay the relevant PAYE across to Sars by the due date will result in Sars raising a 10% penalty for late submission or payment.
Interest at the prescribed rate will accrue on the outstanding amount until such time as it is paid.
The employer must take note that Sars considers defaulting on submission or non-payment in a serious light, as you, the employer, are only acting as agents on behalf of Sars for the collection of the tax. In other words, failure to pay across PAYE that doesn’t belong to you is considered an offence and you will be held personally liable for the non-payment of tax.
In terms of correctly calculating the PAYE to be deducted from an employee’s remuneration, you would need to refer to the Guidelines as provided by Sars on its website, or alternatively employing the services of a professional to assist you.
In addition to the submission of monthly EMP201 returns to Sars, a Bi-Annual Reconciliation and a final PAYE Reconciliation that includes the issuing of IRP5 and IT3 (a) Tax Certificates will be required covering the first six months of the year (due 31 October) and then the full 12 months (due 31 May).