If you own a business or have someone working for you, you must register as an employer for income tax purposes and send the tax to the South African Revenue Service (SARS) every month. Tax expert Margie Lagerwall of MGL Admin Services explains how it works.
1. Two main types of tax are deducted from an employee’s salary or wages:
- SITE – Standard Income Tax on Employees for those earning more than R27 000 per year.
- PAYE – Pay as You Earn is tax on everything that you earn over and above R60 000. The amount of PAYE depends on earnings and is calculated from tax tables issued by SARS.
Under the PAYE system, tax is deducted from an employee’s income by their employer as they earn it. The amount withheld is determined by a tax code which encapsulates the taxpayer’s individual tax allowances.
From 1 March 2002 the definition of an employee was amended to include directors of private companies and members of close corporations. Therefore the only business owners not required to pay PAYE are sole traders and partners. However, if a sole trader or partnership is registered as an employer for employees’ tax, they can voluntarily pay PAYE for themselves as well.
2. How do you keep up to date with tax payments? Make sure you keep a proper record of amounts paid to employees and that the correct amount is paid over each month, on or before the due date.
3. What are the penalties for late payment or non-payment? A late submission is subject to a 10% penalty. Interest is raised at the rate prescribed by SARS and accrues until the amount, penalty and interest are all paid. It’s important for the business owner to check the receipt received from SARS to ensure that there are no outstanding amounts.
Even if there is no payment to be made, any return issued by SARS has to be completed and returned. If this is not done, SARS can issue a summons with a fine of up to R500 per return.
When and how do you pay taxes?
Employees’ tax is due by the 7th (or last business day before that) of the following month. A return (EMP201) must be completed and submitted to SARS each month. Payments can be made as follows:
- By cheque, submitted with the form at any SARS office.
- Via Internet banking.
- At any bank – correct banking details with reference numbers are required.
- By e-Filing, which allows the employer to complete the EMP201 and make the payment online.
For more information contact
Margie Lagerwall, MGL Admin Services, +27 11 472 4456; www.mgladmin.co.za