The 3 June deadline for companies to submit their annual PAYE reconciliations to the South African Revenue Services (SARS) looms and, according to statistics released by SARS recently, only about 50 000 of the 260 000 companies registered have so far lodged reconciliations since the submission season began on 4 April.
Those that don’t make the tax certificate deadline will pay penalties that could amount to 10% of the total PAYE deducted from employee earnings. A SARS notice released earlier this year stated that the penalty will be calculated as 10% of the company’s total tax liability according to EMP201 returns submitted for the full 2010/2011 tax year.
“My understanding is that SARS will not be unreasonable about penalties where companies can prove that non-compliance was the result of circumstances beyond their control,” says Grant Lloyd, MD of payroll and HR software specialist Softline Pastel Payroll.
Lloyd adds that companies could also be penalised for submitting incomplete or inaccurate tax certificates and individuals who fail to submit their returns are also subject to a penalty calculated in proportion to their earnings. Higher earners can expect to pay higher penalties for every month their return is outstanding.
SARS statistics reveal that about 65 000 individual taxpayers were penalised after penalties for individual tax return non-compliance were introduced last year and more than four-million individual returns were received. Most of these were submitted electronically, demonstrating how well the South Africans have responded to the SARS drive to operate a totally electronic process.
“Employers who default on PAYE reconciliations but can provide absolute proof that their failure to do so was beyond their control, can request an RFR (remittance) from SARS which results in a reduction of the penalty to 1% for each month the submission is late. So the quicker the company can submit the less it will pay in penalties.”
Automated payroll software can make PAYE submissions a breeze. By using an automated payroll solution companies need only capture employees’ information and their payslips. During the year end procedures, the electronic tax certificates are generated automatically in the IRP5.11 file. This file can be imported directly into the e@syFile™ Employer system and the payroll EMP501 Reconciliation Report to complete the PAYE, SDL and UIF Reconciliations. This saves businesses considerable time and cost compared to manual calculation and capturing.
SARS will apply its recently introduced ITA88 Agent Appointment Notifications process to appoint companies as agents, obligating them to collect outstanding penalties from employees and pay the amounts over to SARS using the e@syFile software system. Where penalties remain unpaid after three months SARS will appoint the employer’s bank as an agent so that the unpaid amounts can be recovered directly from the employer’s bank account.
Companies should download the latest version of the SARS e@syFile Employer software from the SARS website www.sarsefiling.co.za to ensure accuracy and compliance with SARS requirements.