In this article we review what your tax obligations are apart from the obvious responsibility of merely paying any relevant taxes applicable to you.
Normal Tax
PAYE (Pay as You Earn)
While your employer is responsible for deducting PAYE from your earnings and paying this amount over to SARS you may also have obligations depending on your circumstances.
At the end of the tax year (February) your employer must generate an IRP5 certificate which details your earnings as well as any PAYE that has been deducted. These IRP5 forms are submitted to SARS who then uploads them on your personal tax profile. When the tax season opens, and you access your tax return it will already be populated with the details of your IRP5 certificate/s.
Should you earn more than R500 000 in a tax year you are required to submit a tax return to SARS.
If your only source of income is remuneration (a salary) then all the tax return is effectively doing is confirming the information that SARS already has (from the IRP5 certificate).
Should you earn less than R500 000 in a tax year then you do not have to submit a tax return provided ALL of the following criteria apply:
- Your remuneration is paid from one employer or one source (you must file if you changed jobs during the tax year or have more than one employer or income source).
- You have no car or travel allowance, or company car fringe benefit, which is considered additional income.
- You do not have any other form of income, such as interest, rental income or extra money from a side business.
- PAYE has been deducted or withheld.
If any of the above criteria do not apply, then you are required to submit a tax return.
While the above criteria may not require you to submit a tax return, a taxpayer earning less than R500 000 may elect to submit a tax return should they have a need to claim medical expenses, retirement contributions or travel expenses (resulting in a refund of PAYE).
The tax return must be submitted during the “tax season” which is generally from July to December for people using SARS’ eFiling system or between August and October for those taxpayers manually filing their tax returns.
Provisional Taxpayers
As an employer is not deducting PAYE and paying this tax over to SARS on a monthly basis a Provisional taxpayer is required to submit 3 returns and make 2 and possibly 3 payments to SARS relating to the tax year. This process ensures
- That SARS received some revenue from Provisional taxpayers during the tax year instead of having to wait until the tax year has ended and
- It mitigates (to some degree) the potential risk of a provisional taxpayer having to make a single large tax payment at the year end that may cause liquidity challenges.
The tax year for Provisional Taxpayers generally runs from 1 March to 28 February.
A provisional taxpayer is required to submit a provisional tax estimate (an IRP6) for the period 1 March to 31 August on or before the 31 August. This is a forward-looking estimate as the taxpayer needs to estimate their income for the 12 months ending 28 February. In so doing there are certain rules that the taxpayer must apply
Having estimated their income for the 12 months, on or before the 31 August, the taxpayer is required to make a payment to SARS for this first period as follows:
- Half of the total estimated tax for the full year;
- Less the employees’ tax paid for this period (6 months);
- Less any allowable foreign tax credits for this period (6 months).
A Provisional taxpayer is then required to follow a similar process at the 28 February for the second period (1 September – 28 February). This second estimate; however, is now backwards looking as the taxpayer should have a very good idea of what they have earned for the 12-month period ending 28 February. Again, an IRP6 is required to be submitted for this period.
Having determined their income for the 12 months the Provisional taxpayer is required to make a payment for this second period as follows:
- The total estimated tax for the full year;
- Less the employees tax paid for the full year;
- Less any allowable foreign tax credits for the full year;
- Less the amount paid for the first provisional period.
There may be circumstances where the taxpayer was not able to accurately estimate their earnings for the 12 months ending on the 28 February in their second IRP6 submission which had to be submitted by the 28 February. In these cases, the Provisional taxpayer may elect to submit a third IRP6; however, this must be done within 6 months of the year end i.e. 31 August. The payment related to this third IRP6 will be calculated as follows:
- The total tax estimated payable for the full year;
- Less the employees tax paid for the full year;
- Less any allowable foreign tax credits for the full year;
- Less the amount paid for the 1st and 2nd provisional tax periods.
By submitting this third IRP6 and making the related payment, a Provisional Taxpayer may avoid being charged interest for the late payment of tax.
Provisional tax payments are non-refundable.
Apart from submitting the 2 (or 3) IRP6’s for the tax year, all Provisional taxpayers are required to submit a tax return (usually by 31 January – 9 months after the tax year end).
It is important that Provisional returns and payments are made on the due dates as SARS imposes rather severe penalties on late payments and submissions – typically 20% of the tax liability. If an IRP6 is submitted more than 4 months after the due date SARS will consider it a nil return and penalise you based on this scenario.
Capital Gains Tax
Should you have disposed of immovable property during the tax year it is likely that you would have made a capital gain or a loss. The details of this capital gain or loss must be declared on your tax return.
Sole Proprietors and “Side-line Businesses”
If you operate a business as a sole proprietor or run a side-line business to generate extra income, then the details of that business need to be included in your tax return. You will need to register as a Provisional taxpayer and include this income under the “Local Business, Trade and Professional Income, section”.
You are required to register your sole proprietor business with SARS who will allocate a tax reference number. The income and expenses of this business are effectively ring-fenced; however, the resultant profit or loss is included in the assessment of your personal tax and taxed at the applicable personal rates. It is important that you maintain accurate records of all the income and expenditure related to your business.
Donations Tax
Should you make a donation that is subject to tax then that Donations tax is payable by the end of month following the month in which the donation takes effect. This is done by filling in an IT144 (a standard SARS form) and paying the amount due at your nearest SARS branch or via eFiling if you are registered.
The Donations tax threshold of R100 000 is cumulative and so if you have made several donations during the year you will need to keep track of the total amount and pay for any amounts over the R100 000 (at 20%).
If you are the recipient of a donation it is not taxable in your hands; however, you will need to declare the receipt of this donation under the “Amount considered Non-taxable”. Be aware though that if the Donor fails to pay the Donations tax when it is due the donee becomes jointly responsible for the Donation tax payable. While this may be an awkward conversation, should you be the recipient of a donation you should confirm that the donation tax has been paid.
Conclusion
While we have shown in other articles that there are a number of taxes which SARS collect, most of these are the responsibility of third parties e.g. manufacturers and suppliers or even the Executor of your estate. The taxes above are the ones that you ned to ensure that you have personally paid.
