I want to get a tax directive

• 27 March 2023 – FAQs on Employees’ tax (PAYE) on your pension or annuity for the tax period 1 March 2023 to 29 February 2024
  Click here to view the latest FAQs.
  
  
• 22 March 2023 – Employees’ tax (PAYE) on your pension or annuity for the tax period 1 March 2023 to 29 February 2024
  
  

  Where a pensioner has one source of income during a tax year, our employees’ tax (PAYE) deduction system ensures the correct PAYE deductions from a pension.

  However, where a pensioner is in receipt of more than one source of income, the different sources of income are combined at the end of the tax year to determine the correct amount of tax due. The sum of the income typically places the taxpayer into a higher tax bracket, which normally creates tax due to SARS at year-end. 

  This is not a new principle and it applies to everyone, not only pensioners.

  As a service to pensioners with more than one source of income, legislation makes provision for SARS to determine a more accurate monthly PAYE deduction tax rate. We do this by using the latest data available to SARS and issuing that PAYE tax rate to your pension administrator.  We refer to this as a fixed PAYE deduction rate.  Your pension administrator will then deduct a more accurate amount of PAYE from your pension. The aim of the more accurate fixed PAYE deduction rate is to ensure that you are not faced with a significant tax debt to SARS at year end.

  That said, it is ultimately your decision whether to make use of this service.  If, for example, you are already saving towards a tax debt at year end, then you may wish to opt out of this service. You can opt out of this service by informing your pension administrator of your choice to opt out. If you opted-out in the previous tax year, your choice will remain unless you inform your pension administrator in writing that you wish to participate in this service.  For more detail click here.

• 6 March 2023 – Amendment to Section 1.1, Paragraph (b) (xii)(bb) of the definition of “retirement annuity fund” in section 1(1) of the Income Tax Act
   
  

  Section 1.1, Paragraph (b) (xii)(bb) of the definition of “retirement annuity fund” in section 1(1) of the Income Tax Act has been amended to allow for transfers between Retirement Annuity Funds (RAF).

  The effect of the amendment is that the word “total” is deleted, and the following conditions are inserted –

  • The value of each policy/contract being transferred from one retirement annuity fund to another retirement annuity fund must exceed R371 250 (see highlighted portion blue above); and
  • The value remaining in the retirement annuity fund after the transfer must exceed R371 250.

  However, there is no monetary restriction on the transfer value if the full/total value of the retirement annuity fund is transferred to another retirement annuity fund (i.e., there is no amount remaining in the retirement annuity fund after the transfer).

  Where a taxpayer opts to transfer one or more policies/contracts to a new RAF you are requested to complete a separate tax directive application for each transfer. You will be advised when a single tax directive application can be submitted for all policies for which the transfer is being completed for.

• 12 December 2022 – Trade testing dates and software implementation

SARS will introduce enhancements to the Tax Directives process as indicated in the IBIR-006 Tax Directives Interface Specification Version 6.501. The trade testing dates are still to be confirmed and the implementation of the software is planned for implementation in April 2023. You will receive communication with regards to the exact dates for trade testing and the implementation date closer to the time.

The Tax Directives Interface Specification is available on the SARS website www.sars.gov.za and you are encouraged to review it prior to testing.

Please follow these steps to submit test files:

Step 1:  Before testing can commence, you will need to email 10 taxpayer reference numbers to [email protected] to ensure the numbers are active. In the email subject line, use “Tax reference numbers for Trade Testing”. A maximum of 10 taxpayer reference numbers will be allowed.
Step 2:  You will be notified via the same email address to confirm when testing may commence.

For trade testing queries please email [email protected]

• 9 December 2022 – Implementation of Tax Directive system enhancements scheduled for 9 December 2022

The South African Revenue Service (SARS) has implemented enhancements to the Tax Directives system in line with the introduction of Par 2(2B) of the Fourth Schedule which requires that employees’ tax to be calculated and withheld at a fixed tax rate from an annuity. Read more.

• 7 December 2022 – Implementation of Tax Directive system enhancements scheduled for 9 December 2022

The introduction of Par 2(2B) of the Fourth Schedule requires that employees’ tax be calculated and withheld at a fixed tax rate from an annuity, if a taxpayer receives remuneration from more than one source during a year of assessment and where one or more of those sources is from an employer who is a retirement fund or is licensed as an insurer under the Insurance Act.

These employers are required to apply the fixed tax rates prescribed and made available on e@syFile™ Employer or eFiling by SARS. The policy intention aims to ensure that the monthly employees’ tax is calculated correctly so that the taxpayer does not have a substantial tax shortfall due by you to SARS or due to you by SARS on assessment. These tax rates are calculated using prevailing tax rates and information pertaining to the taxpayer at the time of processing. For more information click here.

• 10 October 2022 – Update on Tax Directives enhancements in line with Financial Sector Conduct Authority (FSCA) were implemented
  
  

  The South African Revenue Service (SARS) implemented enhancements to the Tax Directives process on 16 September 2022 by validating the name of the fund at Financial Sector Conduct Authority (FSCA) as well as the number with the FSCA database.

  Where Funds and Fund Administrators experience spelling errors between information on the FSCA website that is not aligned with your FSCA registration letter, a request to correct the spelling error must be sent to the following contact person: Jodine Scholts at [email protected] at the FSCA. Please note that this email address is only for the correction of spelling errors of names.

  All other issues relating to the FSCA, must be directly addressed with the FSCA via the existing channels available to the Funds and Fund Administrators.

  You are advised to continue using the name exactly as it is listed on the FSCA website until the changes on the name have been effected to avoid a rejection of the directive application.

• 16 September 2022 – Tax Directives enhancements in line with Financial Sector Conduct Authority (FSCA) were implemented
  
  SARS has successfully implemented enhancements to the Tax Directives validation process.

  Please note that going forward, SARS will be validating the registration data and status of entities submitting Tax Directive applications with the Financial Sector Conduct Authority (FSCA). Due to the additional control measures, some applications will inevitably be declined due to failed validations if the data that is captured is not aligned with the information on the FSCA website.

  Fund Administrators and Long-term Insurers are encouraged to ensure that the registration data (Name of the fund, name of participating employer, name of Long-term Insurer and the registered number) captured on the tax directive application is correct and corresponds with the registration data on the FSCA records.

  In the unfortunate event that the tax directive application is declined due to incorrect data captured, kindly ensure that the registration data with the FSCA is used and resubmit tax directive application.

  The following Guides were updated:

  • IT-AE-33-G01 – Tax Directive for Emigration, Cease to be resident and Expiry of visas – External Guide
  • IT-AE-41-G02 – Guide to Complete the Tax Directive Application Forms – External Guide
  • IT-AE-41-G03 – Guide to Complete Submit and Cancel a Recognition of Transfer – External Guide
• 12 September 2022 – Tax Directive Software Implementation
  

  The South African Revenue Service (SARS) will introduce enhancements to the Tax Directives process as indicated in the communication published on 20 July 2022.  The planned implementation date is scheduled for 16 September 2022, you will be notified should this date change.

• 16 August 2022 – Tax Directive Enhancements for September 2022
  Following previous communication, that the South African Revenue Services will be validating the registration data and status of entities submitting Tax Directive applications with the information captured on the Financial Sector Conduct Authority (FSCA) database, please note that some applications will inevitably be declined because of validations failing where the data is not aligned to the data on FSCA records.  For more information click here.
  
  
  
• 25 July 2022 – Emigration withdrawal changes
  

The tax directive system currently includes a validation that results in tax directive applications, with the ‘Emigration withdrawal’ reason where the date of accrual is on or after 1 March 2022, being rejected.  The tax directive validation has been subsequently removed. This means that the accrual date for tax directive applications with the reason ‘Emigration withdrawal’ can be a date after 1 March 2022 but the following supporting documents must be attached to the tax directive application submitted through eFiling to prevent the tax directive being rejected:

• • The emigration application (MP336(b)) with a date stamp before 1 March 2021; and
  • The letter issued by the Authorised dealer must indicate that the emigration is recognised for purposes of exchange control before 1 March 2022 (SARB Approval date).

The Tax Directive Guides have been updated with the information:

• • IT-AE-41-G02 – Guide to Complete the Tax Directive Application Forms – External Guide
  • IT-AE-33-G01 – Tax Directive for Emigration, Cease to be resident and Expiry of visas – External Guide
    
    
• 20 July 2022 – Tax Directive Enhancements for September 2022

SARS will be enhancing the Tax Directive Process. This enhancement entails the validation of specific data captured on the tax directive application form against the information held by the Financial Sector Conduct Authority (FSCA).

The changes will only impact the back-end processes of SARS; there will be no changes made to the IBIR-006 Tax Directives Interface Specification.
The following data will be validated against the Funds’ information as registered with the FSCA:

• the registered fund name;
• participating employer name; and
• FSCA registration numbers (participating employer number included) should be captured as it is on the FSCA data base.

Data captured on the tax directive application must correspond with the registration data with the FSCA. Incorrect data or omitted data will result in the tax directive applications being declined.  

• • A new reason has been added on the IRP3a to cater for foreign companies that are not registered for Pay As You Earn to make severance payments to South African tax residents who have performed work within the Republic for the said company. When the employer pays the employee, the tax practitioner or SARS will select reason <Severance benefit – Paid by a non-resident Employer>
    • When the taxpayer/Tax Practitioner completes the return, a new field will be added on the ITR12 to cater for payments made by foreign entities. The taxpayer/Tax practitioner must select <Y>
    • This will open a container whereby <new source code 3925) will be generated to capture the amount of the severance benefit received and the Tax Directive number which would have been issued for this purpose.

       

• 25 April 2022 – Legislative changes to the Tax Directives process have been implemented.
  
  The following information is important for Fund Administrators, Insurers, Tax Practitioners, Advisors and taxpayers.

  • Taxpayers who are members of a pension preservation or provident preservation fund, who have reached retirement age and are 55 years and older are now allowed to transfer the retirement benefit to another preservation fund or a retirement annuity fund tax neutral on a Form A&D – reason Transfer before Retirement [par 2(1)(c)]
  • • • Taxpayers can now, on retirement, elect to use two thirds (⅔) or more of the total value of the retirement interest in the fund to provide a pension and / or annuity or purchase a living annuity and / or a guaranteed annuity from an Insurer. Alternatively, they can elect to keep a portion of the retirement interest in the fund which will provide a pension and / or annuity and use a portion to purchase a living annuity and / or a guaranteed annuity from an Insurer. However, it is important to note that the condition placed on a purchase of an annuity is that the value of each annuity (living and / or guaranteed and / or remaining in the fund) must be R165 000 and above, respectively. 
• 18 January 2022 – Tax Deductions (PAYE) on your Pension or Annuity
  

  To assist pensioners with more than one source of income, recently introduced legislation makes provision for SARS to determine a more accurate PAYE deduction amount. We do this by using the latest data available to SARS.  Your retirement fund administrator will then deduct a more accurate amount of PAYE from your pensions or annuities. It is our intention to introduce this service with effect from 1 March 2022. Your retirement fund administrator is already aware of all the above. For more detail, click here.

• 6 December 2021 – Tax Directive Enhancements
  

  Enhancements were implemented to the Tax Directives system in line with the IBIR-006 -Tax Directive Interface Specification:  

  In cases where a pensioner has one source of income during a tax year, our PAYE system typically ensures that the tax due at year-end is sufficiently covered by way of monthly PAYE withholdings. However, where a pensioner is in receipt of more than one source of income, a tax debt may arise at year-end when we combine all the sources of income together for purposes of determining taxable income and tax due.

  While the PAYE system permits a pensioner to request that a higher amount of PAYE be deducted so that any tax due at year-end is adequately covered, not many pensioners are making use of this option, which then leaves them with a tax debt at year-end, which they did not budget for. In turn, this has a significant negative impact on the outstanding debt book of SARS.

  In response to this, recently introduced legislation makes provision for SARS to determine the effective rate of tax in respect of the combined employment and/or pension sources of income of a taxpayer, with reference to the latest data available to SARS, and to provide that rate to the retirement fund administrators for purposes of withholding PAYE.

  It is the intention to introduce this service with effect from 1 March 2022.

  In practice, this will mean the following:

  1. Prior to 1 March 2022, SARS will, where it deems necessary, provide retirement fund administrators with the PAYE withholding percentage for each of the pensioners on its payroll that qualify;
     
     
  2. This means that retirement fund administrators will be required to use the rate provided by SARS in respect of remuneration paid or payable with effect from 1 March 2022;
     
     
  3. SARS will provide the PAYE withholding rates by way of an electronic file in CSV format. This file will be issued via e@syFile™;
     
     
  4. Where a PAYE withholding rate has not been provided by SARS in respect of a particular pensioner, retirement fund administrators must continue to apply the normal PAYE withholding rates;
     
     
  5. Where SARS provides a PAYE withholding rate, it will be by way of an annual directive. Where a pensioner’s circumstances change during the year (for example other employment income ceases, or death and so on), the retirement fund administrator may apply the normal PAYE withholding rate as opposed to the withholding rate provide by SARS with effect from the month in which the it becomes aware of the change of circumstances;

  6. Notwithstanding the PAYE withholding rate provided by SARS, a pensioner may at any time, request his or her retirement fund administrator to withhold PAYE at a rate higher than the rate provided by SARS. The Voluntary over deduction indicator in the code 3195 field on the IRP5/IT3(a) certificate must be set to “Y” for yes, if applicable, as per the normal procedure; otherwise it must be “N” for no – this field is mandatory from the 2020 year of assessment. However, all PAYE amounts withheld and paid over to SARS must be declared under code 4102 on the IRP5/IT3(a), including any voluntary over-deducted amounts.

  7. Notwithstanding the PAYE withholding rate provided by SARS, a pensioner may request his or her retirement fund administrator to withhold PAYE at a rate that is equal to the PAYE withholding rate under the normal PAYE withholding tables. In such a case, the retirement fund administrator is required to inform the pensioner of the possibility that the PAYE withholding rate will be insufficient to cover the tax liability of the taxpayer on assessment;

  8. The rates of PAYE withholding provided by SARS apply in respect of the following source codes only:
     a. 3603 – Pension
     b. 3610 – Annuity from a Retirement Annuity Fund
     c. 3611 – Purchased Annuity
     d. 3618 – Annuity from a Provident Fund or a Provident Preservation Fund.