A taxpayer was paid a bonus of R525 000. He signed a contract stating that he would meet certain requirements over the next year in order to keep this bonus. He did not meet the requirements and had to pay the full bonus back to his employer. The bonus wa
Author: The Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
SARS has published a draft Interpretation note with regards to amounts to be refunded to employers (see attached).
A deduction of this amount refunded to the employer by the employee must be treated as a Section 11(nA) deduction in the tax year when the amount is refunded to the employer and not in the year when it was paid by the employer to the employee (e.g. when the expense incur).
In order to claim the refunded amount, the employer must provide the employee with a letter on its letterhead stating the amount refunded to the employer and when the amount was paid and the reasons for the obligation to refund the employer (e.g. non-compliance to a certain criteria, etc.).
The amount should then be completed on the individual income tax return (other deductions). Please refer to the IT12 Comprehensive Guide, for details on where the amount should be completed.