According to the Employment Taxes Validation, where the employer cannot recover the under-deduction from the affected employee, such amount will be deemed to be a penalty payable by the employer only. The relevant tax amount must not be reflected on any c
Author: The Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Where SARS has identify the taxes (PAYE, UIF or SDL) reflected on a tax certificate to be deducted incorrectly, a letter will be issued to the employer with a file reflecting the applicable error certificates. The employer must then determine if the taxes were indeed under-deducted. If the taxes were not under-deducted and an error is found on the SARS result, the specific certificate error can be ignored. However, if the taxes is found to be under-deducted, the employer must collect the under-deducted amount from the relevant employee, before a revised IRP5 may be issued with the correct amount of taxes. In cases where the taxes cannot be collected from the employee, this amount becomes a deemed penalty in terms of paragraph 5(5) of the Fourth Schedule to the Income Tax Act. The employer should then, only complete the following on the EMP501: · PAYE, SDL and UIF amount under deducted against field “Audit results not in certificates” · The tax paid on behalf of employees is only where the employer decide not the collect from the employee. It should be notice that this option results in a fringe benefit (payment of employee’s debt on which PAYE should be calculated as well) The PAYE reference number on the EMP501 should be used for payment purposes. The amount so under-deducted and declared on the EMP501, should be paid for the last period of the relevant reconciliation (e.g. February or August) and the Payment reference should be the PRN for the applicable period.