There are a few key components affiliated with South African Revenue Services (SARS) statutory compliance from a payroll perspective, with not all employers being aware of these. They include monthly EMP201 submissions, interim EMP501 submissions, year-end EMP501 submissions, and IRP5s, amongst others.
There are also many critical timelines to adhere to in terms of submissions for each of these.
Does your business comply with these SARS statutory submissions? Let’s take a detailed look at the requirements, and what happens if you are late with submissions or fail to submit them at all.
A Snapshot of Submission Timelines
Before going into the detail of each, it is important to recognise the rate of required SARS submissions as illustrated:
EMP201: Employer Declarations
Any business employing staff is required to be registered with SARS for Pay As You Earn (PAYE), Skills Development Levy (SDL) and/or Unemployment Insurance Fund (UIF) purposes. It is also a legal requirement to submit an EMP201 on a monthly basis to SARS.
An EMP201 allows for an employer to adjust and/or declare the deductions made for PAYE, SDL, UIF and Employment Tax Incentive (ETI) if applicable, on behalf of their employees for a specific period or a previous period.
The EMP201 and the related payment must be submitted by the seventh of each month. Where the seventh occurs over a weekend or public holiday, the submission and payment should be made by the last business day before the public holiday or weekend.
Because the employer is responsible for administering their own tax account, it is critical to ensure that the payment details shown are correct when payment is made. The payment reference number (PRN) and the allocation of the payment must be correct for PAYE, SDL, UIF, and/or ETI on the EMP201 that you have completed.
EMP501: Employer Reconciliations
EMP501 submissions are split into two submission periods namely the interim submissions and the year-end submissions. Interim submissions are for the six-month period of 1 March to 31 August of each tax year and need to be submitted by the end of October of each year. The year-end submissions are for the full tax year i.e. 1 March to 28/29 February. This submission needs to be declared to SARS on or before 31 May each year.
The EMP501 process forms a key part of the preparation and readiness for the individual tax filing season which occurs later in the year once the EMP501 company returns have been completed.
While employees may refer to either of these submissions as an IRP5 or IT3(a) (employee tax certificate), both of these are generated based on the information in the year-end submission but for different reasons. An IRP5 is received by an employee when they have a salary above the non-taxable limit, and shows that tax was due and has been deducted over the financial year. An IT3(a) is issued when no tax is due.
Late Submissions and Payments
Those who submit and/or pay late will pay non-compliance penalties.
Late submission and/or late payment of the EMP201 levies a 10% penalty of the outstanding amount of the declaration as well as a 7% interest monthly thereafter for every month further of late payments.
EMP501 returns submitted late can result in administrative penalties of 1% of the year’s PAYE liability. This penalty can then also increase by 1%, reaching up to 10% of the year’s PAYE liability over a period of ten months.
Criminal Offences
Furthermore, it is a criminal offence for an employer wilfully or negligently to:
- Fail to submit full and complete EMP201 or EMP501 returns to SARS by the due date.
- Fail to issue an IRP5 or IT3(a) certificate to an employee within the specified periods.
- Fail to deduct or withhold PAYE or UIF, or not to pay any PAYE or UIF deducted or withheld over to SARS as required by law.
- Use or apply PAYE deducted or withheld for any purpose other than to pay that amount to SARS.
Choose to Remain Compliant
The monthly, as well as annual submissions discussed in this article, are essential for the collection of the required statutory deductions by the employer and the payment of these to SARS. These returns are a critical component to the information that is reflected on an employee’s tax certificate and forms an important part of the statutory collections process for SARS as well as the Department of Labour.
As a trusted compliance partner, rely on us to assist your business with mitigating the risk concerning SARS legislative compliance.
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