2012_13 payroll pocket guide

7/30/2019 2012_13 Payroll Pocket Guide

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A complete reference guide covering

legislative matters that affect the payroll

practitioner in South Africa

Payroll

Pocket Guide

2012/13


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Quick Reference

Subsistence Allowance

Travel inside RSA - incidentals only R93

Travel inside RSA - meals and incidentals R303Travel outside RSA - meals and incidentals Schedule of limits per country

Reimbursed Kilometres (Travel)

Current rate is R3.16 per kilometre.

Long Service Award

The fi rst R5 000 of the asset given to an employee is free from tax. The value of

the asset that exceeds R5 000 is taxed as an Acquisition of an Asset.

Official Interest Rate (Low and Interest Free Loans)

As from 1 March 2011 the offi cial rate is equal to the SA Reserve Bank

repurchase rate plus 1%. The repurchase rate was 5.5% from 1 March 2011.

UIF Limit - R149 736 per annum, R12 478 per month or R2 879.53 per week.

OID Limit - R277 860 per annum (for 2011/2012).

The limit for 2012/2013 has not yet been promulgated.

BCEA Earnings Threshold - R172 000 per annum as from 1 July 2011.

Medical Tax Credits

R230 for main member

R230 for fi rst dependant

R154 for each additional dependant

Bursaries

A bona fi de bursary, enabling a person to study at a recognised educational orresearch institution.

Open bursary: Exempt from tax

Closed bursary: Exempt if granted to an employee and the employee agrees to

repay the employer if the employee does not complete the studies. Also exempt

if granted to a relative of an employee, unless the employees remuneration is

above R100 000 p/a. If the remuneration is R100 000 or less, the fi rst R10 000

of the bursary is exempt.

The following limits may change during the year:

Official interest rate, UIF limit, OID limit and BCEA earnings threshold.


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Payroll Pocket Guideas at March 2012

A complete reference guide covering legislative

matters that aect the payroll practitioner

in South Africa


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DISCLAIMER

This document includes amendments to the Income Tax Act (1962) up to and including theTaxation Laws Amendment Act No 24 o 2011. It also includes the proposed budget changesalthough these had not yet been promulgated at the time o printing

Although care has been taken with the preparation o this document, VIP makes nowarranties or representations as to the suitability o quality o the documentation or its tnessor any purpose and the client uses this inormation entirely at own risk.

The purpose o this document is to address employees tax and only include reerences toincome tax where applicable.

COPYRIGHT NOTICE

Copyright 2012 by Sotline VIP a division o Sotline (Pty) Ltd, hereinater reerred to as

VIP, under the Copyright Law o the Republic o South Arica.No part o this publication may be reproduced in any orm or by any means without theexpress permission in writing rom VIP.


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Table of Contents

1. Terminology 62. Denitions & Employees Tax Concepts 6

2.1 Employer 7

2.2 Employee 72.2.1 Labour Broker 72.2.2 Personal Service Provider (PSP) 82.2.3 Independent Contractors and Deemed Employees 92.3 Remuneration 92.3.1 Balance o Remuneration 112.3.2 Net Remuneration 112.3.3 Deemed Remuneration and Directors o Private Companies 122.4 Residence Based Taxation 132.4.1 Ordinarily Resident 132.4.2 Deemed Resident - Physical Presence Test 132.5 Standard Employment and Temporary Employees 142.6 Directives 14

3. Allowances, Advances, Reimbursements and Other Remuneration 153.1 Allowance 153.2 Advance 153.3 Reimbursement 15

3.4 Travel Allowance 153.4.1 Reimbursive Travel Allowance 163.4.2 Estimating a Travel Allowance or an Employee 173.4.3 Establishing the Rate per Kilometre o the Vehicle 173.4.4 Travel Allowance on Assessment 193.5 Subsistence Allowance 193.6 Share Incentive Schemes 203.6.1 Taxation o Gains made in respect o Rights to

Aquire Marketable Securities 203.6.2 Taxation o Broad-Based Employee Share Plans 203.6.3 Taxation o Vesting o Equity Instruments 213.7 Arbitration Awards 213.8 Lump Sum Payments - Gratuities due to Dismissal,

Retrenchment or Retirement 213.9 Back Pay (Antedated Salaries) 22

4. Exempt Income 224.1 Uniorm Allowance 22

4.2 Relocation Allowance 234.3 Foreign Employment Income 244.4 Bursaries and Scholarships 24


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5. Tax Deductible Deductions 255.1 Employee Pension Fund and Retirement Annuity Contributions 255.1.2 Retirement Funding Employment (RFI) 255.2 Income Replacement Policies 265.3 Employee Medical Aid Contributions 26

5.3.1 Medical Tax Credits 265.4 Payroll Giving 27

6 Fringe Benets 276.1 Acquisition o an Asset at Less than the Actual Value 276.2 Right o Use o an Asset 286.3 Right o Use o Motor Vehicle 296.4 Meals, Rereshments and Meal and Rereshment Vouchers 306.5 Residential Accommodation 306.6 Free or Cheap Holiday Accommodation 326.7 Free or Cheap Services provided by the Employer 326.8 Low or Interest-ree Loans 336.9 Medical Aid Contributions 346.10 Benets in Respect o Insurance Policies 356.11 Payment o Debt or Release rom Debt 35

7. Monthly Reconciliation and Payments 358. Annual Reconciliation & Tax Certicates 369. Income and Assessment 37

9.1 Gross Income 379.2 Exempt Income 379.3 Deductions rom Income 38

10. Unemployment Insurance Fund (UIF) 3910.1 Employee 3910.2 UIF Remuneration rom which the Contribution

must be calculated 4010.3 UIF Contributions 40

11. Skills Development Levy (SDL) 41

11.1 Employer 4111.2 Employee 4111.3 SDL Remuneration (Leviable Amount) 4111.4 Skills Development Levy 42

12. Occupational Injuries and Diseases (OID) 4212.1 Employee 4212.2 Earnings to be included or the OID Annual Return 4312.3 OID Limit 44

IRP5 Codes 44


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This Payroll Pocket Guide includes only the most important topics regarding EmployeesTax. For more inormation, reer to the EMP10 Guidelines or Employers as well as theSARS website: www.sars.gov.za

Key to Icons

Helpful Hints

General information to assist with the practical application of atopic.

Budget ProposalsChanges to these items were proposed in the budget, but were not

yet promulgated at print time. Please visit our website,

www.vippayroll.co.za, or the SARS website, www.sars.gov.za, forupdated information. An updated pocket guide is available to VIP

clients in the Customer Zone on our website throughout the year.

Possibility to ChangeThese items may change during the course of the year. Please visit

our website, www.vippayroll.co.za, or the SARS website,www.sars.gov.za, for updated information.


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6 Payroll Pocket Guide 2012|2013 2012 Sotline VIP

1. TERMINOLOGY

All reerences to he or his includes she or her in the case o a emaletaxpayer, and it or its reers to a taxpayer other than an individual, and isnot intended to be discriminatory.

The word company when used in the context o the Income Tax Act, 1962includes a closed corporation, and the term director o a private companyincludes a member o a closed corporation who perorms the same duties.

A person includes both a natural person and a legal entity.

A natural person or tax law purposes is:

an individual, or a sole proprietor, or a partner in a partnership.

A legal entity or tax law purpose is:

a public company, or a private company, or a closed corporation, or a trust, or any divisional council, municipal council, village management board or like

authority.

2. DEFINITIONS & EMPLOYEES TAX CONCEPTS

Employees tax is an advance payment against the liability or income tax atthe end o the tax year, and is collected through a system o employees taxand provisional tax payments. The employer must withhold employees taxrom all remuneration paid or payable to an employee during the tax year, andthe Fourth and Seventh Schedules to the Income Tax Act have been devoted

to this requirement.

Remuneration and employees tax are thus merely estimates to allow theadvance collection o income tax on a regular and equitable basis

The Fourth Schedule to the Income Tax Act requires three elements to bepresent beore employees tax can be withheld or payment to SARS:

an employer paying remuneration

to an employee.


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7Payroll Pocket Guide 2012|2013 2012 Sotline VIP

2.1 Employer (Paragraph 1, 4th Schedule)

An employer is dened by the Fourth Schedule as being any person whopays or is liable to pay any person (natural or legal) any amount by way oremuneration.

2.2 Employee (Paragraph 1, 4th Schedule)

An employee is dened by the Fourth Schedule as:

any person, excluding a company, who receives/accrues any remuneration, any person who receives remuneration or services rendered to or on behal

o a labour broker, any labour broker,

any class or category o person declared by notice in the Gazette to be anemployee, any personal service provider and any director o a private company.

2.2.1 Labour Broker

A labour broker is any natural person who or reward:

provides a client with other persons to render a service or perorm work or

the client, or procures other persons or a client, and remunerates those other persons

or their services to or work done or the client.

I the labour broker is not in possession o an IRP30 exemption certicateissued by SARS, employees tax must be withheld rom the payment made tothe labour broker.

All payments made to labour brokers must be reported on either an IRP5 oran IT3(a) against code 3617.

A labour broker must always be processed on the payroll,

whether in possession of an IRP30 or not. Note that a labour

broker for employees tax purposes can only be a natural person.


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2.2.2 Personal Service Providers (PSP)

A company or trust is classied as a Personal Service Provider i:

(tick the appropriate blocks)

any services are rendered personally to a client o the company or trustby a connected person to the company or trust,

ANDthe person would be regarded as an employee had he renderedthe services directly to the client (i.e not through the company/trust),

ORthe service must be perormed mainly at the premises o the clientand the service provider is subject to control and supervision as tothe manner in which the service is perormed,

ORmore than 80% o the income o the company or trust rom servicesrendered consists, or is likely to consist o amounts received romany one client,

EXCEPTi the company or trust throughout the year o assessment employs 3or more employees who are on a ull time basis rendering the serviceon behal o the company, other than a shareholder or member o thecompany or trust or a connected person to such person.

I (1) and (2) are ticked, the company or trust is a PSP.

I only (1) or (2) is ticked, the company or trust is not a PSP.

I (3) is ticked, the company or trust is not a PSP, even i (1) and (2) are ticked.

I the only ground on which the entity is declared to be a PSP is the 80%o service income rule, the entity may supply the client an annual adavitstating that it does not receive 80% o its service income rom any one client,

and the client may rely on this adavit in good aith.

A Personal Service Provider is taxed at a rate o:

33% or a Personal Service Provider company and 40% or a Personal Service Provider trust.

1

2

3

A company that is not a personal service provider must not be

loaded into the payroll, nor receive a tax certifcate.


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2.2.3 Independent Contractors and Deemed Employees

When dealing with natural persons only, an amount paid or services renderedis excluded rom remuneration i the payment is made to:

a resident o South Arica and the payment is or services rendered in the course o carrying on any

independent trade.

A person will not be an Independent Contractor (i.e. is an employee oremployees tax purposes) i he:

is not a resident o South Arica, or renders services to or on behal o a labour broker, or is a labour broker, or

is a personal service provider, or i services must be perormed mainly at the premises o the person

paying or or requesting the service and the service provider issubject to control and supervision as to the manner in which theduties are perormed or to the hours o work.

EXCEPT

i the person throughout the year o assessment employs 3 or moreemployees who are on a ull time basis rendering the service onbehal o the person, other than connected person to such person.

I (1) is selected at any time, the person is not an Independent Contractor.I only (2) is selected, the person is not an Independent Contractor.I (2) and (3) are selected, the person is an Independent Contractor.

The amount paid or services rendered by an individual who is determinednot to be an Independent Contractor is deemed to be remuneration and issubject to PAYE.

2.3 Remuneration (Paragraph 1 and Paragraph 11A, 4th Schedule)

Remuneration is dened as any amount o income which is paid or payableby way o any salary, leave encashment, wage, overtime pay, bonus, gratuity,

commission, ee, voluntary award, lump sum payment, annuity, emolument,

1

2

3

Report all remuneration paid to an Independent Contractor on the

tax certicate against code 3616.


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pension, superannuation allowance, retiring allowance or stipend, whether incash or otherwise, and whether or not in respect o services rendered.

In addition to the general denition above, the ollowing items are specicallyincluded in remuneration: annuities, any amount received or services rendered by virtue o any employment or

the holding o any oce, restraint o trade payments, any amount received in respect o the relinquishment, termination, loss,

repudiation, cancellation or variation o any oce or employment, excludinglump sum awards rom a pension, provident or retirement annuity und,

lump sum benets rom a pension, provident or retirement annuity und, any amount received in commutation o amounts due under any contract

o service, the cash equivalent o any ringe benets calculated in accordance with the

provisions o the Seventh Schedule, except the user o motor vehicle ringebenet (see Fringe Benets, section 6),

an allowance or advance included in taxable income by section 8(1)(a)(i),other than a travel, subsistence or public oce allowance,

80%/20% o any travel allowance, 80%/20% o the cash equivalent o the user o motor vehicle ringe benet, 50% o any allowance granted to the holder o a public oce to deray

expenditure incurred or the purposes o his oce, gains made by the exercise, cession or release o any right to acquire

marketable security as contemplated in section 8A, gains made rom the disposal o any qualiying equity share as

contemplated in section 8B, and gains made as a result o the vesting o any equity instrument as

contemplated in section 8C.

The ollowing items are specically excluded rom the denition o

remuneration: amounts paid in respect o services rendered by a person ordinarily

resident in South Arica in the course o any trade carried on independently, any pension payable under the Aged Persons Act, 1967 or the Blind

Persons Act, 1968, any disability grant or allowance under the Disability Grants Act, 1968, any grant or contribution under the Childrens Act, 1960, any amount paid to an employee wholly in reimbursement o expenditure

actually incurred by the employee in the course o his employment, and

any annuity under an order o divorce or decree o judicial separation, orunder any agreement o separation.


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2.3.1 Balance o Remuneration (Paragraph 2(4), 4th Schedule)

The amount o employees tax to be withheld rom the employee is calculatedon the balance o remuneration, which is the remuneration remaining aterdeducting:

current and arrear contributions to approved pension und schemes andretirement annuity unds that are processed on the payroll, within speciedlimits (see Deductions, section 5),

at the option o the employer, current and arrear contributions to approvedretirement annuity unds by the employee or which proo was provided,within specied limits (see Deductions, section 5),

at the option o the employer, income replacement policy contributionswhich the employee has paid directly and supplied proo thereo annually,not subject to any limit,

contributions made by an employee to a registered medical schemethat are processed on the payroll i the employee is 65 or older. (seeDeductions, section 5),

at the option o the employer, contributions to a registered medical schemewhich the employee has paid directly and supplied proo o, i the employeeis 65 or older. (see Deductions, section 5) and

any donation by the employee, made by the employer or which theemployer received a S18A(2)(a) receipt, within specied limits (seeDeductions, section 5).

2.3.2 Net Remuneration (Paragraph 11B(1), 4th Schedule)

Net remuneration is calculated by excluding certain items rom balance oremuneration. These items include amongst other:

remuneration paid to employees who are not in standard employment(temporary employees),

remuneration paid to a director o a private company or a member o aclose corporation,

travel allowances, public oce allowances, annuities rom benet unds and lump sums rom retirement unds.

Employees tax calculated in terms of a directive is based on

remuneration and not on the balance of remuneration.


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2.3.3 Deemed Remuneration and Directors o Private Companies

(Paragraph 11C, 4th Schedule)

Amendments to the Fourth Schedule to the Income Tax Act that cameinto eect on 1 March 2002 included directors o private companies (and

members o close corporations according to section 1 o the Income Tax Act)in the denition o employee. It also removed the exclusion o paymentsmade to directors rom the denition o remuneration, thereby includingthese payments in remuneration.

The concept o deemed remuneration or directors was also introduced witheect rom 1 March 2002. Deemed remuneration is calculated according tothe ollowing ormula:

Y = T / N

where

Yis the amount to be determined,

T is the balance o remuneration o the previous year o assessment,excluding:

termination lump sums, retirement lump sums or withdrawal benets, amounts in terms o commutation o amounts under an employment

contract and gains made in terms o sections 8A, 8B or 8C on the Income Tax Act that

were included in remuneration.

N is the number o completed months the employee was employed by thatcompany in the previous year o assessment.

I the balance o remuneration or the previous year o assessment is not yetdetermined, then T is the balance o remuneration o the year preceding the

previous year o assessment, increased by 20%.I the balance o remuneration or the preceding year o assessment has alsonot yet been determined, you need to apply or a directive rom SARS.

Employees tax is calculated on the highest value when actual and deemedremuneration is compared.

With eect rom 1 March 2004, no deemed remuneration will be applicable imore than 75% o T in the ormula consists o xed monthly payments.


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A director can apply or a hardship directive (IRP3d) when the actualremuneration o the previous year is signicantly larger than the estimatedremuneration or the current year.

2.4 Residence Based Taxation (Section 1)

From 1 March 2001 the Residence Based taxation system replaced theSource Based taxation system that was previously used in South Arica.

The residence based system states that an employee must be taxed on hisworld-wide income in the country where he is resident. Note that citizenshipis not equivalent to residency - a non-South Arican citizen can become aresident o South Arica by virtue o the physical presence test, and is thenliable or income tax in South Arica on his world-wide income. Non-residents

must be taxed on income derived rom a source within South Arica.

According to section 1 o the Income Tax Act, a person can either beordinarily resident or a deemed resident by means o the physical presencetest.

2.4.1 Ordinarily Resident

The courts have interpreted ordinarily resident to mean the country to which

the individual would normally return to rom his wanderings. It would be thecountry where the individuals usual or principal residence is located.

2.4.2 Deemed Resident - Physical Presence Test

An individual who is not ordinarily resident during the year o assessment willbe deemed to be a resident i he is physically present in South Arica:

or more than 91 days in aggregate in the current year o assessment and

or more than 91 days in aggregate in each o the ve preceding years oassessment and

or more than 915 days in aggregate during the ve preceding years.

I a person who is a deemed resident leaves South Arica or at least 330continuous days, the person will not be a deemed resident eective rom therst day he let South Arica.


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2.5 Standard Employment and Temporary Employees

(Paragraph 11B, 4th Schedule)

Employees are in standard employment i they work 22 hours or more perweek. Employees are also in standard employment i less than 22 hours per

week are worked and no other job is held. The employer must have a writtendeclaration rom the employee that no other job will be held during the periodthat the employee is employed by the current employer.

Employees that work less than 22 hours per week and have more than onejob are in non-standard employment, and are called temporary employees.

Examples o temporary employees are:

casual commissions paid, such as spotters ees,

payments to casual workers or irregular or occasional services rendered,or ees paid to part-time lecturers.

Employees in non-standard employment are taxed at a rate o 25% othe balance o remuneration. I the ollowing criteria apply, no tax may bededucted:

at least 5 hours on a specic day are worked and the daily rate o pay is less than the daily equivalent o the annual tax

threshold.

Employees in standard employment are taxed by applying the latest table oStatutory Rates o Tax to their annualised balance o remuneration.

There is a special ruling or labour-only sub contractors in the building industryonly, whereby the employer must withhold 6% o remuneration or PAYE, 2%o UIF remuneration or UIF contributions and 1% o the leviable amount orskills development levy. The directive number or this ruling is CON181356.

2.6 Directives

Tax directives are issued in accordance with paragraph 9(1) o the FourthSchedule. Tax directives are always issued in relation to a specic tax year.

The tax directive percentage already takes into account expense claims anddeductions that may be claimed on assessment thereore, the tax directivepercentage must be applied to remuneration and not balance o remuneration(i.e. beore deducting tax deductible deductions rom remuneration).

The ollowing tax directive application orms are available:


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IRP3(a) Gratuities paid by the employer,

IRP3(b) Employees tax deducted at a xed percentage,

IRP3(c) Hardship directives a xed amount o tax to be deducted,

IRP3(d) Hardship directives or deemed remuneration o directors, and

Form A to D various lump sum benets payable by unds.

Tax according to directives are not nal tax, and is recalculated taking intoconsideration total income on assessment.

3. ALLOWANCES, ADVANCES, REIMBURSEMENTS &

OTHER REMUNERATION

3.1 Allowance

An allowance is granted to an employee where the employer is certain thatbusiness-related expenses will be incurred by the employee, but where theemployee does not have to account or expenses to the employer. The valueo the allowance is based on the expected business-related expenditure.

3.2 Advance

An advance is paid in lieu o business expenses an employee will incur andor which the employee must provide proo to the employer. The value othe allowance is based on the expected business-related expenditure. Thedierence between the advance and the actual expense will be recovered byeither the employer or the employee.

3.3 Reimbursement

A reimbursement is a repayment by the employer to the employee orbusiness-related expenditure incurred by the employee on instruction by theemployer and is subject to proo o the expenditure.

3.4 Travel Allowance (Section 8(1)(b))

A travel allowance is granted to an employee in respect o travelling expensesor business purposes. This is a xed allowance that the employee receivesevery pay period, regardless o actual business kilometres travelled in that

period.


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Private travel includes travelling by the employee between his place oresidence and his place o employment or business, as well as any othertravelling done or his private purposes.

Any travel expenses paid or reimbursed (other than a reimbursement oractual business kilometres travelled) by the employer, whether paid ordirectly or by issuing a garage or petrol card, are regarded as a travelallowance. For PAYE purposes, SARS requires the deduction o PAYE rom80% o a travel allowance, unless the employee uses the vehicle at least 80%or business, then SARS requires the deduction o PAYE rom 20% o a travelallowance. The ull travel allowance must be disclosed on the employees taxcerticate against code 3701.

3.4.1 Reimbursive Travel Allowance

Reimbursements calculated using the actual business kilometres travelled arenot regarded as being a travel allowance, regardless o the rate per kilometreused or the distance travelled. These reimbursements are excluded romremuneration, and are never subject to PAYE. However, reimbursements thatare reported against code 3702 are assessed or income tax purposes at theend o the tax year.

The determined rate per kilometre used or the reimbursement o business

kilometres should be a rate no greater than R3.16 or the rate derived romthe rate per kilometre schedule (the prescribed rate) published by SARS,and is one o the actors used to determine the code against which thereimbursement must be reported.

Report the reimbursement on the tax certicate against code 3702 i:

the rate o reimbursement exceeds the prescribed rate, or more than 8000 business kilometres are reimbursed in the tax year, or a travel allowance is paid in addition to the reimbursed amount.

Report the reimbursement on the tax certicate against code 3703 i:

the rate o reimbursement is less than the prescribed rate, and less than 8000 business kilometres are reimbursed in the tax year, and

no travel allowance is paid in addition to the reimbursed amount.

SARS adds code 3702 to code 3701 on assessment, and the employee

must claim his business travel expenses against the total amount.


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Code 3703 will not be assessed, and the employee will not have to

claim business travel expenses on his annual return. If code 3702 is

used, the employee must claim business travel expenses on his annual

return, whether the employee has a 3701 travel allowance or not.

3.4.2 Estimating a Travel Allowance or an Employee

It is to the advantage o an employee who is required to travel or businesspurposes to have a realistically estimated travel allowance paid to him duringthe tax year.

I the allowance is too low, it is possible that the travel expenses claimed onassessment will exceed the allowance. I business travel expenses are claimedthat are more than the allowance, only expenses up to the amount o the

allowance will be granted, and the employee will be eectively penalised.

I the allowance is excessive and not based on realistic estimates, it can beseen by SARS to be an abuse, and disallowed as a travel allowance.

The calculation o a realistic travel allowance should be done in the sameway that SARS will assess the allowance at the end o the tax year. Threeelements are required to calculate the travel allowance:

an estimate o the business kilometres to be travelled in the year,

an estimate o the private kilometres to be travelled in the year and the rate per kilometre applicable to the value o the car.

3.4.3 Establishing the Rate per Kilometre o the vehicle

The determined value o the vehicle is the original purchase price includingVAT but excluding nance charges and interest. Use this value to look up theposition o the vehicle used or the travel in the table.

The rates per kilometre are divided into three components on the schedule,namely xed cost, uel cost and maintenance cost.

The xed cost element covers the cost o depreciation, loss o interest,licensing and insurance or the year, and must be divided by the totalkilometres (private and business) travelled in the tax year to give a xed costrate per kilometre.

The uel and maintenance costs are given as a rate per kilometre, and mustbe added to the xed cost rate per kilometre only where the employee bears

the cost o these items.


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Value o the Vehicle(including VAT) R

Fixed costR/annum

Fuel costc/km

MaintenanceCost c/km

0 - 60 000 19 492 73.7 25.7

60 001 - 120 000 38 726 77.6 29.0

120 001 - 180 000 52 594 81.5 32.3

180 001 - 240 000 66 440 89.6 36.9

240 001 - 300 000 79 185 102.7 45.2

300 001 - 360 000 91 873 117.1 53.7

360 001 - 420 000 105 809 119.3 65.2

420 001 - 480 000 119 683 133.6 68.3

480 000+ 119 683 133.6 68.3

Diagram to estimate a travel allowance or an employee

1 Value o car (incl. VAT) Supplied by employee

2 Estimated private kilometres Supplied by employee

3 Estimated business kilometres Supplied by employee

4 Total estimated kilometres Calculate: 1 + 2

5 Fixed cost Look up in table

6 Fixed cost per kilometre Calculate: 5 / 4

7 Fuel cost per kilometre Look up in table

8Maintenance cost perkilometre

Look up in table

9 Total cost per kilometre Calculate: 6 + 7 + 8

10 Travel allowance Calculate: 3 x 9

This calculated allowance is an annual value. It is urther suggested thatan additional value is added to the allowance in order to accommodate avariance rom the estimated kilometres used in the calculation.

Note that i the employer reimburses the employee or business kilometrestravelled in addition to granting a travel allowance, then the value o the annualtravel allowance as calculated above should be reduced by the estimated

value o the reimbursements.


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3.4.4 Travel Allowance on Assessment

I the employee retained supporting documentation (i.e. proo o actualexpenditure and a logbook o business kilometres travelled), then the actualexpenditure can be claimed on assessment, but limited to the value o the

allowance. The actual number o business kilometres travelled is used tocalculate the claim and the prescribed rate per kilometre can be used, oractual costs can be used to determine a true rate per kilometre.

I no supporting documentation is retained, the employee will not be able toclaim any expense on assessment.

The claim is always limited to the value o the travel allowance (which orassessment purposes is the total o codes 3701 and 3702).

3.5 Subsistence Allowance (Section 8(1)(c))

In order to qualiy or a subsistence allowance, the employee must be

required to spend at least one night away rom his usual place o residence.Subsistence allowance payments are excluded rom remuneration and arenever subject to PAYE, irrespective whether the actual payment exceeds thelimits.

Payments that exceed the limits will be assessed by SARS.

The ollowing are the limits or subsistence allowances or the 2012/2013 taxyear:

Travel within the Republic: R93 per day or incidental expenses only and R303 per day or meals and incidental expenses.

Travel outside the Republic:

A schedule o rates per country, published on the SARS website.

Subsistence allowances or local travel up to the values o R93 and R303per day must be reported against code 3714. I the value o the allowanceexceeds these daily limits, the ull value o the allowance must be reported

against code 3704.

Individuals wanting to claim business travel expenses must keep a log

book from March 2010. Keep at least the following information: date

of travel, start and end destinations, reason for travel (e.g. client you

went to see), business kilometres travelled.


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Subsistence allowances or travel outside South Arica up to the valuesindicated in the schedule per country must be reported against code 3714.I the value o the allowance exceeds these daily limits, the ull value o theallowance must be reported against code 3715.

Codes 3704 and 3715 must also be used i the employer pays any o theactual costs in terms o which the allowance was granted. Employers shouldin act reduce the daily limit by the value o the actual costs paid by theemployer.

An employee may be given a subsistence advance in lieu o nights theemployee will spend away rom his usual place o residence. The employerhas to reconcile the advance by the ollowing month. I the employee didnot travel as intended, the advance has to be repaid to the employer or theadvance must be taxed in ull as a general allowance or salary.

3.6 Share Incentive Schemes

The purpose o this section is to clariy the taxation o shares and shareincentive schemes (as part o remuneration on the payroll), and not to detailthe complex issues surrounding the setup o these schemes. Note thatcertain shares may again be taxable at a later stage (as part o income onassessment).

3.6.1 Taxation o Gains made in respect o Rights to Acquire Marketable

Securities (Section 8A)

According to paragraph 11A o the Fourth Schedule, an employer must applyor a directive on the gain made rom the exercise, cession or release o anyright to acquire any marketable security according to section 8A. The rights interms o this section would have been acquired beore 26 October 2004.

The dierence between the amount paid and the market value at date o

exercise, cession or release is the gain that must be taxed. Process thegain against IRP5 code 3707, and process the tax according to the directiveagainst IRP5 code 4102.

3.6.2 Taxation o Broad-Based Employee Share Plans (Section 8B)

According to paragraph 11A o the Fourth Schedule, an employer mustdeduct normal tax on the gain made rom the disposal o any qualiying equity

share, or any right or interest in a qualiying equity share according to section8B.


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Process the gain against IRP5 code 3717. The gain must be taxed as anannual/periodic earning. Where the employee is not in employment o theemployer, tax o 25% must be deducted.

3.6.3 Taxation o Vesting o Equity Instruments (Section 8C)

According to paragraph 11A o the Fourth Schedule, an employer must applyor a directive on the gain made rom the vesting o any equity instrumentaccording to section 8C. These equity instruments would have been acquiredon or ater 26 October 2004.

The gain must be processed against IRP5 code 3718, and the tax accordingto the directive against IRP5 code 4102.

3.7 Arbitration Awards

Arbitration awards are generally awarded due to unair dismissal, terminationo the employment contract prior to the expiry date or due to unair labourpractices. Amounts paid due to unair dismissal and early termination o thecontract is remuneration and is taxable on the payroll. Amounts paid due tounair labour practice might be included in remuneration.

Apply or a directive on arbitration awards. The taxable portion o the award

must be taxed as a periodic/annual earning and reported against IRP5 code3608. The non-taxable portion o the award must be processed against IRP5code 3602.

3.8 Lump Sum Payments - Gratuities due to Dismissal, Retrenchment

or Retirement

Employer paid gratuities paid due to the dismissal, retrenchment or retiremento an employee is taxed according to the same rules as retirement und lumpsums rom March 2011. Retirement und lump sum benets and severancebenets are subject to a cumulative exemption o R315 000. The employer isrequired to apply or a directive in order to establish the exempt amount. Thegratuity must be paid out against IRP5 code 3901, and the tax according tothe directive against IRP5 code 4115.

Note that notice pay which the employee is entitled to may not orm part othe amount declared on the tax directive application.


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3.9 Back Pay (Antedated Salaries)

Backdated salaries may relate to current and prior tax years. Tax on the totalamount must be determined in relation to the current tax rates.

The portion o the back pay that relates to the current tax year must bereported against IRP5 code 3601. The portion o the back pay that relates toany prior tax year must be reported against IRP5 code 3907, which is taxedas a periodic/annual earning.

In order to acilitate the employees assessment, the employer must providethe employee with a schedule indicating the value o remuneration and itsapportionment to applicable tax years.

4. EXEMPT INCOME

All items that are exempt rom income are also exempt rom remuneration orPAYE purposes, and include:

war pension, payment o compensation in respect o diseases contracted by persons

employed in mining operations, disability pension, workmens compensation (OID), social security under the social security system o any other country, pension received rom a source outside the RSA, Unemployment Insurance payments (UIF) and Loss o Oce lump sums (subject to tax directive).

In addition to the above, the ollowing items are also exempt but must bereported on the payroll.

4.1 Uniorm Allowance (Section 10(1)(nA))

The value o a special uniorm given by an employer to an employee or somuch o an allowance made by the employer to the employee in lieu o anysuch uniorm, as is reasonable, is exempt rom income, provided that as aterm o his employment, the employee is required while on duty to wear thespecial uniorm and it is clearly distinguishable rom ordinary clothing. Theamount paid as an allowance must not be subjected to employees tax, andmust be reported against code 3714 on the tax certicate.


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4.2 Relocation Allowance (Section 10(1)(nB))

Expenses may arise as a result o the transer o an employee rom one placeto another.

The ollowing expenses borne by the employer are exempt rom tax:

the expenses o transporting the employee, members o his household andtheir personal goods rom the previous place o residence to the new placeo residence,

the expense o hiring residential accommodation in a hotel or elsewhere orthe employee or members o his household or a period o 183 days aterthe transer took eect and

those costs that the Commissioner may allow that have been incurred bythe employee in respect o the sale o his previous residence and in settling

into permanent accommodation at his new place o residence.

The ollowing items are exempt rom tax i the employer reimburses theemployee or:

registration o a mortgage bond and legal ees, transer duty, cancellation o a mortgage bond and an agents ee on the sale o the employees previous residence.

The ollowing settling-in costs are also exempt rom tax. I no reimbursementis made it is acceptable i the equivalent o one months basic salary, inaddition to the regular salary, is paid to the employee to cater or theseexpenses:

new school uniorms, replacement o curtains, motor vehicle registration ees and telephone, water and electricity connection.

I the employer pays or the ollowing two items, these amounts are subjectto employees tax, and must be reported on the tax certicate against code3713 (Other allowances - taxable):

loss on the sale o a previous residence and

architects ees or the design o a new residence.

All relocation allowance values must be reported against code 3714

Other allowances (Excl), whether paid through the payroll or not.


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4.3 Foreign Employment Income (Section 10(1)(o))

The income o a person who is outside South Arica or purposes o renderingservices or or on behal o his employer or a period which is in aggregatemore than 183 days during any 12 month period, and which includes a period

o more than 60 continuous days during that 12 month period, is exempt romincome tax. This income must be reported against the oreign employmentincome codes on the tax certicate, with nature o person A or B.

4.4 Bursaries and Scholarships (Section 10(1)(q))

A bona de bursary or scholarship granted to any person (i.e. an openbursary) to study at a recognised educational or research institute is exemptrom tax.

I the bursary or scholarship is granted to an employee (i.e. a closedbursary), it will be exempt rom tax as long as the employee agrees to repaythe employer i the employee ails to complete the course o study. Norepayment is necessary i the ailure directly results rom death, ill-health orinjury.

I the bursary or scholarship is granted to an employees relative (i.e. aclosed bursary):

I the employees remuneration or the year o assessment is aboveR100 000, then the ull amount o the bursary is taxable (i.e. no exemptportion) irrespective o whether the value o the bursary is above or belowR10 000.

I the employees remuneration is R100 000 or less, then the rst R10 000 (per annum) o the bursary is exempt the excess above R10 000 (per annum) o the bursary is taxable.

I the bursary is taxable, it must be taxed as a ringe benet (even though

bursaries are not specied in the Seventh schedule which deals with ringebenets), and reported against code 3809. The exempt portion must bereported against the new code 3815 rom March 2012.


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5. TAX DEDUCTIBLE DEDUCTIONS

(Paragraph 2(4), 4th Schedule)

5.1 Employee Pension Fund and Retirement Annuity Contributions (also

Section 11(k) and Section 11(n))

Pension and retirement annuity contributions have tax deductible limits thatmust be applied by the employer. The employee may contribute more thanthese limits, but he will only receive the tax benet up to the statutory limit.

Any contributions made by the employee in excess o the limits will reduce thetaxable value o any lump sum paid in uture.

5.1.2 Retirement Funding Employment (RFI)

In order to determine the statutory limits or the deduction o pension und andretirement annuity contributions, one must determine the value o RetirementFunding Income (RFI). RFI is essentially the amount o remuneration taken intoaccount in the determination o the contributions made by an employee or

employer to a pension or provident und, and includes the ull amount o thetravel and public oce allowance i these allowances are taken into accountto determine the contribution.

Non-Retirement Funding Income is the income, as dened or RFI, whichremains once RFI is allocated according to the rules o the applicablepension or provident und. There is thus a pool o income available or RFIaccumulation and the rules o the pension or provident und will determine thevalue o this pool that must accumulate as RFI.

Pension

The total annual deduction allowed is limited to the greater o:R1 750 or 7.5% o RFI

Arrears pension

The total annual deduction allowed is limited to: R1 800.

Retirement Annuity

The total annual deduction allowed is limited to the greatest o:R1 750 or 15% o Non-RFI, or R3 500 less allowed pension deduction.

The employer contribution to a RA that is taxed as a fringe benet,

is a deemed employee contribution and may be taken into account

when calculating the tax deductible RA value.


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Arrears Retirement Annuity

The total annual deduction allowed is limited to: R1 800.

5.2 Income Replacement Policies

An income replacement policy is a policy that covers the employee againstloss o income as a result o illness, injury, disability or unemployment. Thetotal premium paid by the employee is tax deductible and is allowed to theextent that the premium pays towards disability cover. These policies do nothave a tax deductible limit.

5.3 Employee Medical Aid Contributions (also Section 18 and Section

6(A))

From 1 March 2012, only employees who are 65 years and older is entitled toa Medical Aid tax deductible deduction. Employers must take into account

contributions paid by an employee, as well as the employer which is taxedas a ringe benet, to a registered medical scheme beore calculating theemployees tax liability.

Where the contributions are not processed on the payroll (i.e. the employeebelongs to a private medical aid), employers may at their option take intoconsideration contributions to a registered medical scheme which theemployee has paid directly and supplied proo o.

5.3.1 Medical Tax Credits

From 1 March 2012, Medical Aid is no longer a tax deductible deduction oremployees who are younger than 65.

An employee who is younger than 65 is entitled to medical tax credits inrespect o medical scheme contributions paid by the employee. Employersmust take into account contributions paid by an employee, as well as theemployer which is taxed as a ringe benet, to a registered medical scheme.

The employer contribution to an Income Replacement Policy that is

taxed as a fringe benet, is a deemed employee contribution and may

be taken into account when calculating the tax deductible IncomeReplacement Policy value.


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The medical tax credit amounts have not yet been promulgated at

time of printing.

The monthly medical tax credit amounts are:

R230 or the main member, R230 or the rst dependant and R154 or each additional dependant.

Medical tax credits (rebates) must be deducted rom the normal employeestax calculated or the month.

5.4 Payroll Giving

Employers must take into consideration any donation made by the employeethat is paid over by the employer on behal o the employee and or which theemployer is issued a S18A(2)(a) tax receipt.

The maximum value o any donation that may be deducted rom remunerationis limited to 5% o balance o remuneration, beore taking into account thepayroll giving deduction.

6. FRINGE BENEFITSThe term ringe benet reers to payments made to employees in a orm otherthan cash. A taxable benet is deemed to have been granted by the employerto the employee i such benet is granted as a reward or services rendered orto be rendered.

The Income Tax Act species in the Seventh Schedule how to calculatethe value o the benet that accrues to the employee or employees taxpurposes. The Commissioner uses market value or some types o benets,cost price or others and special ormulae or the rest.

6.1 Acquisition o an Asset at Less than the Actual Value

(Paragraph 5, 7th Schedule)

A taxable benet arises where an employee acquires an asset consisting oany goods, commodity, nancial instrument or property o any nature (otherthan money), either or no consideration or or a consideration that is less than

the value o the asset.


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The value o the taxable benet is the market value o the asset at the time theemployee acquires the asset, less any consideration given by the employee.

The cost o the asset must be used instead, where:

the asset is movable property (other than marketable securities or an assetwhich the employee had prior use o) and was acquired to dispose o it to

the employee, or the asset was held as trading stock (other than marketable securities),

unless the market value is less than the cost, then use the market value.

No value is placed on:

uel and lubricants supplied or the use o a company car, an asset awarded as a long service award or bravery award up to R5 000.

Long service is dened as an initial unbroken period o service o at least 15years and any subsequent unbroken period o service o at least 10 years.

6.2 Right o Use o an Asset (Paragraph 6, 7th Schedule)

A taxable benet arises where an employee has been granted the private ordomestic use o any asset either ree o charge or or a consideration that isless than the determined value o the use. The value o the taxable benetis the determined value o the private or domestic use o the asset, less anyconsideration given by the employee or its use during that period and any

amount spent by him on its maintenance or repair.

The determined value is either:

the amount o the rental/lease i the asset is hired or leased by theemployer, or

i the employer owns the asset, 15% per annum o the lesser o the costto the employer or the market value o the asset when the employee is rstgranted the use o the asset.

The calculated value is an annual value that must be apportioned to eachmonth in the tax year.

No value is placed on the asset i:

the private use is incidental to the business use, it is provided as an amenity or or recreational purposes at the place o

work or or the use o employees in general, it is equipment or machines which the employees in general may use rom

time to time, it is telephone or computer equipment which the employee mainly uses or

business purposes or


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it consists o books, literature, recordings or works o art.

Use o the employers motor vehicle or accommodation is dealt with separately.

6.3 Right o Use o Motor Vehicle (Paragraph 7, 7th Schedule)

A taxable benet arises where an employee is granted the right to use theemployers motor vehicle. Private use includes travelling between theemployees place o residence and his place o work, as well as other privatetravel.

The determined value o the motor vehicle is: the cost o the vehicle to the employer, excluding nance charges and

interest but including VAT and the value o any maintenance plan, i thevehicle was acquired under a sales agreement,

the retail market value, including VAT and the value o any maintenanceplan, at the time the employer rst obtained the use o the vehicle i thevehicle was acquired under a lease, or

in any other case, the market value o the vehicle, including VAT and thevalue o any maintenance plan, at the time the employer rst obtained theright to use the vehicle.

Maintenance plan is dened as a contractual obligation undertaken by aprovider to underwrite the costs o all maintenance o that motor vehicle, otherthan costs related to top-up fuids, tyres or abuse o the vehicle. The obligation

is or at least 3 years and 60 000 kilometres rom the date the providerundertakes the contractual obligation, and may terminate when either conditionis met.

Depreciation o 15% is allowed or each completed 12 month period rom thedate the employer rst obtained the vehicle or the use o the vehicle, to thedate the employee was rst granted the use o the vehicle. This means that anemployee who had the use o a vehicle, then stopped using the vehicle andlater started using the vehicle again, must be taxed on the determined value that

was calculated the rst time and is not entitled to any urther depreciation.The ringe benet value placed on the private use o a motor vehicle or eachmonth or part o a month during which the employee was entitled to theprivate use is:

3.5% o the determined value o the motor vehicle, or 3.25% o the determined value i the determined value includes the value o

a maintenance plan,

less any consideration given by the employee, other than consideration in

respect o license, insurance, maintenance or uel cost.


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No value is placed on the private use o the employers vehicle i:

it is a pool car that is available to be used by employees in general, theprivate use is inrequent or incidental to the business use and the vehicle isnot normally kept at or near the residence o the employee, or

the employees duties require him to use the vehicle regularly outsidenormal working hours, and the private use is inrequent or incidental to thebusiness use.

6.4 Meals, Rereshments and Meal and Rereshment Vouchers

(Paragraph 8, 7th Schedule)

A taxable benet arises when an employee has been provided with a mealor rereshment or with a voucher entitling him to a meal or rereshmenteither ree o charge or or a consideration less than the value o the meal or

rereshment. The value o the taxable benet is the cost to the employer lessany consideration paid by the employee.

No value is placed on the meal i:

it is provided in a place mainly or wholly patronised by the employees or aplace on the employers premises, or

it is provided during business hours, extended business hours or on aspecial occasion.

6.5 Residential Accommodation (Paragraph 9, 7th Schedule)

Residential accommodation provided to an employee either ree o charge oror a consideration that is less than its determined rental value gives rise to ataxable benet. The residential accommodation may be urnished orunurnished, and it may be provided with or without uel, power or water.

The value o the taxable benet in respect o residential accommodation mustbe the determined rental value less any consideration paid by the employee.

In order for individuals to claim a reduction in the fringe benet value,

claim for costs such as license, insurance, maintenance or fuel, it is

required that a logbook is kept. The claims may now only be made on

assessment.

Note that the kilometres travelled by a judge from his home to court,

will be seen as business kilometres from 1 March 2011.


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The rental value to be determined is the greater o:

any rent payable by the employer and other expenditure in respect o theaccommodation, or

an amount determined according to the ormula

(A - B) x C/100 x D/12 where:

A = remuneration in the previous year, excluding travel allowance,the taxable value o a company car, and the taxable value o reeor cheap residential accommodation.

B = R59 750 rom 1 March 2011 (subject to certain exclusions).

C = 17 unless the accommodation consists o at least 4 rooms.

= 18 i unurnished and power or uel is supplied by the employer.

= 18 i urnished and no power or uel is supplied by the employer.

= 19 i urnished and power or uel is supplied by the employer.

D = the number o completed months in the year o assessmentduring which the employee is entitled to the accommodation.

The meaning o a room or the purposes o the above ormula has beeninterpreted by SARS as being a separate part o the inside o a building. A

room does not only include bedrooms, but all rooms such as bathrooms,toilets, living rooms, bedrooms, kitchens, studies, etc. Each room in anopen plan area that is clearly distinguishable must also be counted as aseparate room.

The ormula must be applied where:

ull ownership o the accommodation vests in the employer, or ull ownership o the accommodation does not vest in the employer, and

it is customary or the employer in the industry concerned to provide

ree or subsidised accommodation, and it is necessary or the employer to provide ree or subsidised

accommodation: or the proper perormance o their duties, or as a result o the requent movement o the employees, or as a result o the lack o employer-owned accommodation and

the benet is provided solely or business purposes.

No value is placed on any accommodation provided in South Arica to anemployee who is away rom his usual place o residence in South Arica.

The value of B has not yet been promulgated at time of printing.

Please verify this value before doing the calculation.


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No value is placed on accommodation provided to an employee whose usualplace o residence is outside South Arica:

or a period that does not exceed 2 years rom date o arrival in SouthArica to perorm the duties o his employment, or

i the employee is in South Arica or less than 90 days in the year o

assessment.

The accommodation will however be taxable:

i the employee was in South Arica or more than 90 days in the year oassessment preceding the date o arrival in South Arica to perorm theduties o his employment, or

to the extent that it exceeds the limit o R25 000 per month.

6.6 Free or Cheap Holiday Accommodation (Paragraph 9(4), 7th

Schedule)

The value o any holiday accommodation provided by an employer is:

the rent and expenses paid relating to such accommodation in relation tothe period it was occupied, i the accommodation is hired by the employer,or

in any other case, the rate at which the accommodation could normally belet to any person who is not an employee.

6.7 Free or Cheap Services provided by the Employer (Paragraph 10,

7th Schedule)

The value consists o the employers cost in rendering such a service less anyamount paid by the employee, unless the employers business is to conveypassengers by sea or air where travel to destinations outside South Arica isvalued at the lowest are payable less any amount paid by the employee.

No value is placed on: travel acilities provided by an employer, who is in the business o

conveying passengers, to his employee, his spouse or minor child to travelto: any destination in South Arica, or any destination outside South Arica with overland travel, or any destination outside South Arica with air or sea travel, i they are

on stand-by,

general transport provided to and rom employees homes to work,


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any communication service used mainly or business (e.g. 3G cards), any service rendered at work or the better perormance o duties or or

recreational purposes, or any travel acility provided by an employer to the spouse or minor child i:

the employee is stationed more than 250km away rom home or the

duration o the term and the employee must spend more than 183 days per year away rom his

usual place o residence or business and the travel is between the employees usual place o residence and the

place where the employee is stationed.

6.8 Low or Interest-ree Loans (Paragraph 11, 7th Schedule)

A taxable benet arises when a loan has been granted to the employee:

either by the employer or by arrangement by the employer, or with no interest being payable by the employee, or with interest at a rate

lower than the ocial rate o interest.

The benet value is the amount o interest determined by calculating theinterest at the ocial rate o interest, and deducting the interest actually paid,and may be applied on a regular basis, or at the end o the tax year.

The ocial rate o interest is equal to the repurchase rate plus 1% rom1 March 2011.

No taxable value is calculated or a low interest loan:

i it is a casual loan and does not exceed R3 000 at any time; i it is a loan to enable the employee to study.

Note that the limit o R3 000 is not an annual limit. No taxable value need becalculated i the low interest loans are casual and irregular, and the total othese loans at any point in time is less than R3 000.

Be aware that under certain conditions, loans granted by employers all underthe provision o the National Credit Act. It is recommended that employersremove their exposure to the Act by outsourcing the granting o loans tonancial institutions whose business it is to provide loans.

The repurchase rate may change during the tax year.


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6.9 Medical Aid Contributions (Paragraph 12A & 12B, 7th Schedule)

A taxable benet arises when the employer pays the contributions o anemployee to a medical scheme i the employee is not retired rom suchemployer, irrespective o the employees age. The value o the benet is equal to

the value o the monthly employer contribution.

An employee is retired i the employee leaves the employment o such employerdue to superannuation (reaching normal retirement age according to the rules othe employers superannuation und), ill-health or other inrmity.

This taxable ringe benet must be taken into account as remuneration oremployees tax purposes and is deemed to be a medical aid contribution paidby the employee. I the employee, his or her spouse or child is a person with adisability, the contribution claims on assessment are limited to the contributionamount that exceeds our times the medical tax credit, and the ull value omedical expenses can be claimed. I the employee is 65 or older, the ull value otheir monthly contributions as well as all the medical expenses can be claimed.

I the employee is younger than 65, the contribution claims on assessment willbe limited to the contribution amount that exceeds our times the medical taxcredit, and the medical expenses to be claimed are limited to the expenses thatexceed 7.5% o the employees taxable income.

Employers are required to report employer medical scheme contributionsagainst the ollowing codes:

4474 medical scheme contributions or all employees, regardless o age,who are not retired rom the employ o such employer, and

4493 medical scheme contributions or all employees retired rom suchemployer.

Where an employer paid medical costs in respect o any medical, dental orsimilar services, hospital services, nursing services and prescribed medicine

on behal o an employee, his or her spouse, child, other relative or dependant,such payments are regarded as taxable ringe benets.

Employers are required to report the expense paid against the ollowing codes:

4024 - medical costs deemed to be paid by the employee in respect o theemployee, his or her spouse and child, and

3813 - medical costs deemed to be paid by the employee in respect oother relatives or dependants.

The medical expenses reported against code 4024 are added to the

expenses already refected against code 3813 on the tax certicate.


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6.10 Benefts in Respect o Insurance Policies (Paragraph 12C, 7th

Schedule)

This taxable benet arises where an employer pays any premiums towards aninsurance policy which is directly or indirectly or the benet o the employeeor his or her spouse, child, dependant or nominee. When an insurance policyis in the name o the employer (employer-owned), this paragraph is applicableand the employee should be taxed on the ringe benet. This paragraph onlyapplies to products supplied by an insurer.

In the case where the policy is in the name o the employee (employee-owned), it alls within the scope o Release rom Debt ringe benet.

6.11 Payment o Debt or Release rom Debt (Paragraph 13, 7th Schedule)

This taxable benet arises when the employer has

directly or indirectly paid an amount owing by the employee to a thirdperson without requiring the employee to reimburse him, or

released the employee rom an obligation to pay an amount owing by theemployee to him.

The taxable value is the amount the employer paid or the amount o debt romwhich the employee was released.

Note that any subscriptions paid to a proessional body by the employer onbehal o the employee has no taxable value as long as the membership osuch body is a condition o the employees employment.

7. MONTHLY RECONCILIATION AND PAYMENTS

In order to acilitate a seamless reconciliation at the end o the tax year, it isimportant to ensure that your payroll is reconciled on a monthly basis.

Ensure that payroll values refect all input document values. Ensure that the ollowing gures balance beore rolling into a new period;

net salaries paid, third party payments made, reports printed and exportscompleted.

SARS introduced a new EMP201 monthly declaration process in order toalign it with the already changed annual reconciliation processes. The use othe new orm was compulsory rom July 2010.


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The EMP201 serves as a remittance advice. It acts as a paymentdeclaration in which the total payment is declared with the allocations orPAYE, SDL and UIF. A unique payment reerence number is used to link thepayment to the payment allocation. Payments must be made beore or onthe seventh day o the next month.

The EMP201 allows adjustments to previously submitted declarations, orreallocate credits.

All payments go through a clearing account and are allocated according tothe liabilities stated on the EMP201. Over- or under-payments as well asunallocated payments can easily be picked up on the EMPSA and can becorrected using the Reconciliation Assistant.

The three bank accounts or PAYE, SDL and UIF will be consolidated into thePAYE account (SARS PAYE). Employers will thus only make one payment.

8. ANNUAL RECONCILIATION & TAX CERTIFICATES

In terms o the Fourth schedule to the Income Tax Act, an employer mustsubmit a tax certicate to SARS at the end o the tax year or every employeeas dened above. IRP5s must be issued or those employees rom whomemployees tax has been withheld during the tax year, and IT3(a)s or thoseemployees rom whom no employees tax has been withheld.

Employers are not allowed to issue employees with their tax certicates untilthe EMP501 reconciliation is completed and copies o both the return andthe tax certicates have been submitted to SARS. The e@syFile employersotware must be used in order to submit reconciliations and tax certicatesto SARS.

SARS may levy a penalty o 10% o the total amount o employees tax dueor the year o assessment i the submission o the EMP501 return and tax

certicates is not done by the last day o the ling season.

Comprehensive guides are available on the SARS website. Go to

www.sars.gov.za Tax Types PAYE. Download The Account

Management Guide series.


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9. INCOME AND ASSESSMENT

Income tax is the Governments main source o income and is levied in termso the Income Tax Act 58, 1962 (the IT Act). All persons that earn taxableincome in a tax year (or a year o assessment) are subject to income tax.

Where the payroll deals with remuneration, SARS deals with income onassessment. Remuneration makes provision or very specic income anddeductions to be taken into consideration when calculating PAYE, whereincome is concerned with the total amount o income and deductions andalso makes provision or certain claims to be made against income.

9.1 Gross Income

Gross income in a year o assessment is broadly dened as:

or a resident person - the total amount, in cash or otherwise, received oraccrued to him, rom all sources (world-wide income) and

or a non resident person - the total amount, in cash or otherwise, receivedor accrued to him, rom a source within South Arica.

The ollowing are items related to employment that are specically included:

annuities, amounts paid or services rendered, compensation or any restraint o trade, compensation or loss o oce, lump sum payments rom benet unds, amounts due under service contracts that are commuted, payments or knowledge or inormation (royalties), ringe benets.

9.2 Exempt Income

Exempt income is income that is ree rom income tax. For employmentpurposes, the most important exempt items are the ollowing:

alimony and maintenance, qualiying bursaries and scholarships, qualiying relocation benets, R315 000 o a qualiying retirement award and und lump sums (directive

required), employment outside o the Republic (more than 183 days in aggregate

including a continuous period o at least 60 days),


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interest received up to specied limits, unemployment insurance benets, uniorms and uniorm allowances. disability and war pensions, Occupational Injuries and Diseases Act compensation.

9.3 Deductions rom Income

Deductions are the amounts that have been incurred as expenses in theproduction o income, and that are deductible rom income in terms o theIncome Tax Act. These amounts are specied in sections 11 to 19, andsection 23 o the Income Tax Act, and together orm the general deductionormulae.

Some o the items that are allowed as a deduction (subject to limits), include: amounts that are excluded rom the limitation o section 23(m) o the IT

Act, and may be claimed as a deduction against employment income by allemployees, namely: contributions to a pension or a retirement annuity und, legal expenses in respect o employment, depreciation o assets used or employment income, such as

computers and cell phones, bad debts in respect o employment, premiums paid to compensate or loss o income,

subscriptions to proessional societies, travelling expenses and medical expenses.

Some o the items that are not allowed as a deduction, include:

cost incurred in the maintenance o the taxpayer, domestic or private expenses, interest, penalties and taxes, expenses incurred to produce exempt income and expenses relating to employment income (section 23(m)) received or

any employment or oce held. This does not apply to an agent orrepresentative whose remuneration is mainly derived in the orm ocommission based on sales or turnover attributable to that person, nordoes it apply to an independent contractor.


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10. UNEMPLOYMENT INSURANCE FUND (UIF)

The Unemployment Insurance Contributions Act is administered by SARS andlegislates who should pay UIF contributions and how much.

The Unemployment Insurance Act is administered by the Department oLabour and legislates the payment o benets as well the submission o aDeclaration o all employees each month.

Both Acts dene who are employees as well as remuneration or UIFpurposes.

10.1 Employee

Both UIF Acts dene an employee as any natural person who receives

remuneration, or to whom remuneration accrues, in respect o servicesrendered or to be rendered by that person, but excludes an independentcontractor.

In principle, an employee or the Fourth schedule is usually an employee orUIF, but there are some di erences:

all legal entities are excluded rom UIF, common law independent contractors are excluded even i they are

included as deemed employees by the Fourth schedule, all employees must contribute irrespective o residency or citizenship, but

only those contributors with an RSA bar-coded ID number will be able toclaim benets and

domestic workers and seasonal workers were included as employees romApril 2003 with special conditions or domestic workers only.

Excluded rom contributions only (must be included in the Declaration):

learners employed according to Section 18(2) o the Skills DevelopmentAct,

employees who work less than 24 hours per month, employees in the national and provincial spheres o government, persons who will be repatriated at the end o the period o service, the President, Deputy President, a Minister, Deputy Minister, a member o the National Assembly, a permanent delegate to the National

Council o Provinces, a Premier, a member o an Executive Council or a member o a provincial legislature, any member o a municipal council, a traditional leader, a member o a provincial House o Traditional Leaders and a member o the

Council o Traditional Leaders.


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10.2 UIF Remuneration rom which the Contribution must be calculated

UIF Contributions must be based on remuneration as dened in the FourthSchedule to the Income Tax Act, but excluding:

pension, superannuation allowance or retiring allowance, annuities, payments to a labour broker in possession o an IRP30 exemption

certicate, amounts paid or loss o employment, such as retrenchment pay and

payments or commutation o oce, voluntary awards in respect o relinquishment, termination, loss,

repudiation, cancellation or variation o any oce or employment, once-o payments such as lump sum payments rom pension, provident or

retirement annuity unds, restraint o trade payments and commission.

As can be seen rom the above, remuneration received in respect o ongoingemployment services rendered (with the exception o commission), isused or the calculation o UIF contributions. Non employment relatedremuneration is excluded.

Note that the gains made rom sections 8A, 8B and 8C share schemes, aswell as lump sums emanating rom other sources than benet unds areincluded in remuneration or UIF purposes.

Because remuneration as dened in the Fourth Schedule o the Income TaxAct is used or UIF remuneration, this includes only the taxable value o thetravel allowance, use o motor vehicle ringe benet and the public oceallowance.

10.3 UIF Contributions

I the employee is not excluded as an employee, then both the employer andthe employee must contribute monthly at a rate o 1% o UIF remuneration upto the current limit.

Employees earning over the current limit o R149 736 per annum, R12 478 permonth or R2 879.53 per week must pay contributions at the limited amount.

I the employer is registered with SARS or PAYE purposes, the UIFcontribution must be paid to SARS, otherwise to UIF.


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11. SKILLS DEVELOPMENT LEVIES (SDL)

The purpose o the skills development legislation is to improve the skillslevel o the South Arican workorce by increasing the levels o investment ineducation and training in the labour market.

The Skills Development Act o 1998 is administered by the Department oLabour, and brought into being the concepts o SETAs, monthly levies andvarious grants to incentivise employer participation.

The Skills Development Levies Act o 1999 is administered by SARS, anddeals only with the calculation and payment o the monthly levy by employers.

The levy rst became payable rom 1 April 2000 at a rate o 0.5% o theleviable amount, and this was increased to 1.0% rom 1 April 2001.

11.1 Employer

All employers registered with SARS or employees tax purposes in termso the Fourth schedule must register with SARS or skills development,irrespective o whether they are excluded rom paying the levy by one o theollowing conditions:

any public service employer in the national or provincial sphere ogovernment,

any national or provincial public entity, i 80% or more o its unding comesrom government, any religious or charitable institution, any municipality in possession o a certicate o exemption and any employer where the total annual remuneration or the next 12 months

is not expected to exceed R500 000.

11.2 Employee

An employee, or skills development levy purposes, is dened exactly the

same as or the Fourth schedule denition, excluding:

a labour broker to whom an exemption certicate has been issued and a learner as dened in the Skills Development Act.

11.3 SDL Remuneration (Leviable Amount)

The leviable amount is based on the balance o remuneration as dened in theFourth Schedule to the Income Tax Act, but excluding:

pensions, superannuation allowances or retiring allowances,


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annuities, payments or the relinquishment, termination or loss o oce or

employment and lump sum payments rom a pension, provident or RA und.

Note that only lump sums rom benet unds are excluded. Other types

o lump sums related to continuing employment (such as back-dated payincreases) are not excluded.

11.4 Skills Development Levy

Skills Development Levies are paid on a monthly basis to SARS at a rate o1% o the leviable amount.

Since inception o the legislation, there has been a VAT portion o the levy

which employers can claim as input VAT on their VAT returns. From 1 April2005, SETAs were required to deregister as VAT vendors, and the VAT portioncould no longer be claimed. Equally, grants paid by the SETA to the employerno longer contain a VAT portion to be paid over.

12. OCCUPATIONAL INJURIES AND DISEASES (OID)

This Act provides a system o no ault compensation whereby employees

are entitled to compensation irrespective o who caused the problem.

At the same time, employees are prohibited rom instituting damages claimsagainst their employer and certain categories o ellow employees.

The categories o claimants to whom benets become payable are:

employees who suer a temporary disability, employees who suer a permanent disability and dependants o employees who die as a result o occupational injuries or

diseases.Employers must complete and submit the annual W.As 8 return by the 31st oMarch o each year.

12.1 Employee

An employee is broadly dened as any person who has entered into orworks under a contract o service or o apprenticeship or learnership, withan employer, including casual employees, directors and members o closecorporations.


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Excluded as employees are:

persons undergoing military service or training, members o the Permanent Force while deending the Republic, members o the Police Force while deending the Republic, a person who contracts or the carrying out o work and himsel contracts

other persons to perorm such work, legal entities, common law independent contractors and a domestic employee in a private household.

The reerence to works under a contract o service is interpreted inpractice to exclude common law independent contractors.

12.2 Earnings to be included or the OID Annual Return (W.As 8)

The W.As 8 orm gives an interpretation o the Act or items that must beincluded, and those that must be excluded rom the calculation o theemployees earnings.

Included are:

overtime o a regular nature, but not intermittent or irregular overtime, bonus o any kind, including incentive bonuses and annual bonuses, commission, even though the amount may vary rom month to month, the cash value o ood and quarters supplied to sta, tangible ringe benets (those that you can touch) such as a company car

and ree or cheap accommodation, travel and other allowances paid regularly, where the employee is remunerated in accordance with a package o

benets, all items orming part o the package, other than employercontributions such as medical aid contributions and

earnings/drawings paid to a working director o a private company ormembers o a cc.

Excluded are: payments o a reimbursive nature, overtime worked occasionally, payments or specic non-recurring tasks which do not orm part o an

employees normal duties, ex gratia payments, intangible ringe benets such as the taxable portion o medical aid

contributions by the employer and payments to cover special expenses such as subsistence and travelling

costs.


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Note that the regulations to the OID Act clearly exclude travel and subsistenceallowances, which is in contradiction to the interpretation on the W.As 8annual return orm.

12.3 OID Limit

The OID limit or the 2011/2012 tax year is R277 860.

The limit or the 2012/2013 has not yet been gazetted.

IRP5 Codes

Normal Income Codes

3601 Income3602 Income (Excl)3603 Pension (reinstated rom 2012/2013)3605 Annual Payment3606 Commission3608 Arbitration Award3610 Annuity rom a RAF (reinstated rom 2012/2013)3611 Purchased Annuity

3613 Restraint o Trade3614 Other Retirement Lump Sums3615 Directors Remuneration3616 Independent Contractors3617 Labour Brokers (PAYE/IT)

Allowance Codes

3701 Travel Allowance

3702 Reimbursive Travel Allowance (IT)3703 Reimbursive Travel Allowance (Excl)3704 Subsistence Allowance - Local Travel (IT)3707 Share Options Exercised (Section 8A)3708 Public Oce Allowance3713 Other Allowances3714 Other Allowances (Excl)3715 Subsistence Allowance - Foreign Travel (IT)3717 Broad-based Employee Share Plan (Section 8B)

3718 Employee Equity Instruments (Section 8C)


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To report foreign income, add a value of 50 to all normal income,

allowance, fringe benet and lump sum codes, except 3614, 3617,

3908, 3909, 3915, 3920 & 3921.

Fringe Beneft Codes

3801 General Fringe Benets3802 Right o Use o Motor Vehicle3805 Free or Cheap Accommodation (reinstated rom 2012/2013)3806 Free or Cheap Services (reinstated rom 1 March 2012)3808 Payment o Employees Debt (reinstated rom 1 March 2012)3809 Taxable Bursaries or Scholarships (reinstated rom 1 March 2012)3810 Company Contribution to Medical Aid3813 Cost related to Medical Services paid by Company3815 Non-taxable Bursaries or scholarships (Excl) (reinstated rom

1 March 2012)

Lump Sum Codes

3901 Gratuities (retirement/retrenchment)3902 Pension or Retirement Annuity Fund Lump Sum (resignation, transer

or surplus apportionment) (Not valid rom 2009/2010)3903 Pension or Retirement Annuity Fund Lump Sum on retirement or death

beore 1 October 2007 (Not valid rom 2009/2010)3904 Provident Fund Lump Sum (resignation, transer or surplus

apportionment) (Not valid rom 2009/2010)3905 Provident Fund Lump Sum on retirement or death beore

1 October 2007 (Not valid rom 2009/2010)3906 Special Remuneration (e.g. proto-teams)3907 Other Lump Sums (e.g. Backdated salaries extended over previous

tax year, non approved unds)3908 Surplus Apportionments on or ater 1 January 20063909 Unclaimed Benets paid by Fund3915 Pension, Provident or Retirement Annuity Fund Lump Sum Benets

paid on or ater 1 October 20073920 Lump Sum Withdrawal Benets rom retirement unds ater

28 February 20093921 Living Annuity and Section 15C Surplus Apportionments accruing ater28 February 2009


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Gross Remuneration Codes

3696 Gross Non-Taxable Income3697 Gross Retirement Funding Employment Income3698 Gross Non-Retirement Funding Employment Income

Deduction Codes

4001 Current Pension Fund Contributions4002 Arrear Pension Fund Contributions4003 Current and Arrear Provident Fund Contributions4005 Medical Aid Contributions4006 Current Retirement Annuity Fund Contributions4007 Arrear (re-instated) Retirement Annuity Fund Contributions4018 Premiums Paid or Loss o Income Policies4024 Medical Services Costs Deemed Paid or Immediate Family4026 Arrear Pension Fund Contributions - Non-Statutory Forces4030 Donations Paid by the Employer to the Organisation4474 Employers Medical Aid Contributions4493 Employers Medical Aid Contributions i.r.o. Retired Employees4497 Total Deductions

Employees Tax Deduction and Reason Codes

4101 SITE4102 PAYE4115 Tax on Retirement Lump Sum Benets4116 Medical Scheme Fees Tax Credits taken into account or PAYE

purposes4141 UIF Employee and Employer contribution4142 SDL contribution4150 01 - Invalid rom March 2002

02 - Earn Less than the Tax Threshold03 - Independent Contractor04 - Non Taxable Earnings (including nil directive)05 - Exempt Foreign Employment Income06 - Directors Remuneration - Income Determined in the Following

Tax Year07 - Labour Broker with IRP30


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2012/13 Tax tables

Individuals in Standard Employment and Special Trusts

Taxable Income (R) Rate o Tax (R)

0 - 160 000 18% o taxable income

160 001 - 250 000 28 800 + 25% o taxable income above 160 000



484 001 - 617 000 128 400 + 38%

2012_13 payroll pocket guide

Documents