Employees Tax and Provisional Tax Flashcards
When does PAYE get paid over?
Within 7 days after the end of the month
Is Employees Tax a separate Tax? Where are is the legislation contained regarding Employees Tax?
No, Employees Tax is a prepayment of tax rather than a separate tax. It is contained within the Fourth Schedule
Is an agreememnt to not withhold employees tax valid?
No, in terms of Par 7, such an agreement is void, however an agreement to withhold more is allowed (Par 2(2))
What would happen if an Employer does not pay teh employees tax within the prescribed time?
The employer will be held personally liable and will pay the outstanding tax plus interest plus a 10% penalty.
Who is considered an employee
- Par Par a - Any natural person, to whom remunerations is paid or accrues;
- Par b - Any person who receives remuneration or to whom remuneration accrues in respect of services rendered to a Labour Broker
- Par c - Any labour Broker
- Par d - Any person/category of persons the minister deems to be an employee
- Par e - PSP
- par g - A director of a private company
What is “Remuneration”?
An amount of income[1] which is paid/payable to any person by way of:
- Salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance or stipend;
- Whether in cash or otherwise; and
- Whether or not in respect of services rendered
[1] Par 7B deems variable pay to be taxable on a cash basis and not earlier of accrual/receipt. Income requires the source rules to be applied
What is specifically excluded from the definition of “remuneration”?
(ii) Amounts or Services rendered by independent contractor.
(iii) Government Pensions and Grants
(vi) Whole reimbursement of expenditure actually incurred in course of employment.
(viii) Annuities in terms of a divorce order
What paragraph of the fourth schedule deals with deductions
Par 2(4)(a)-(f)
What is the employment tax incentive and where is it contained?
Par 2(2A) of the Fourth Schedule deals with this. It is an incentive for employers to hire resident non-connectedpersons aged between 18 -29, earning between R2 000 - R6 000, and not a domestic worker. Under this incentive scheme teh employer may then retain a portion of the employees tax for his own benefit. It will be included in Gross Income but specifically exempted in terms of S 10(1)(s)
Who is not eligible to be considered an independent contractor?
(a) Non-residents;
(b) employee of labour broker;
(c) Labour Brokers;
(d) Specifically Declared EE by minister;
(e) PSP; or
What is the safe harbour rule
- Person employs ≥ 3 employees, full time throughout YOA
- Employees are not connected persons
What is a Labour Broker?
- Any natural person who conducts business;
- Where such a person (for reward):
- Provides a client with other persons to render service/work; or
- Procures such other persons for the client
- For which the services/work of the other persons are remunerated by such a person (Labour broker)
A Labour broker is an “employee” as defined and therefore any remuneration payable to a labour broker is subject to PAYE
What does Par 11C apply to?
Par 11C applies to directors of private companies. As a director they may not receive a generic remuneration (which is subject to employees tax as normal employees) they may not be taxed in a year/month. To prevent this from happening par 11C deems a notional remuneration to be received by the director according to that formula: Y = T/N, where Y is the deemed remuneration in a month, T is the balance of remuneration (BoR) and N is the number of montsh the director is employed in that month. This amount is what the employees tax is based on. Should the director receive actual remuneration he will have to pay PAYE on it. however, in terms of Par 9(5), the amount of employees tax to be withheld from this actual remuneration is determined after the tax on the deemed remuneration is held. In other words, the additional tax will come off of his actual remuneration.
What are the implications for the employer in terms of Par 11C?
The employer is always responsible for the tax calculated on the deemed remuneration (which is paid out of the company’s pocket). If there is additional tax to be paid this must be withheld from the actual remuneration of the director. In other words, where the director receives an actual remuneration and the tax on the deemed remuneration exceeds what the actual tax should be the company will still pay the deemed tax, but may claim the difference from the director - the director will receive a refund for this difference on his personal assessment. Par 11C(4) states that the company has a right of recovery of this amount from the director by arrangement or even by reducing future remuneration payments.
Must a director of a private company register for provisional tax?
Yes, a director may not receive remuneration and must therefore, in terms of the definition of “Provisional Taxpayer”, register as one
What is the timeline for a provisional taxpayer
What is meant by the “Latest Preceeding Year of Assessment” when determining the estimate to be submitted by a provisional taxpayer in Par 19(1)(d)?
In terms of Par 19(1)(e) the latest preceding year of assessment is:
- Preceding the year in which the estimate is being made; and
- In respect of which a notice of assessment has been issued by the commission not less than 14 days before the date on which the estimate is required. Provided that:
- The commissioner has iro any estimate, issued a return to the TP for the payment of provisional tax, upon which he has identified the TP’s taxable income for the latest preceding year for which the notice was issued.
This is known as the 14 day rule
