Good day, I would like to know what code should reflect on an employees’ IRP5 for incentives received? at the moment they are using code 3713 is this correct?
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
Relevant law
Step 1: The Fourth Schedule of the of the Income Tax Act No.58 of 1962(“ITA”) deals with the taxation of remuneration.
Other resources:
SARS website on source codes refers
Code 3713 other allowances
Code 3605 annual payment-taxable
Comment on member’s query:
You need to arrive at your own conclusion based on the above guidance.
We agree – code 3713 is used for allowances. You must determine the exact nature of the amount that accrues to the employees here.
The code 3605 is used for an incentive bonus is, like it is also used for an annual bonus. According to the Oxford dictionary, an incentive bonus, when used as a noun, is “a sum of money added to a person's wages to reward good performance”, and an incentive “a payment or concession to stimulate greater output or investment.” The incentive may well, particularly when it is not paid regularly, also be an incentive bonus.