Requesting a tax directive from SARS? Consider these six risks first

by , 19 July 2013
While fixed percentage tax directives can ensure better cash flow for your business especially when managed correctly, there are also risks involved. Read on to discover what these risks are so you can take them into account before requesting a tax directive.

According to the  Practical Tax Loose Leaf Service SARS issues a tax directive (IRP3) to instruct you, as the employer, on how to deduct your employees' tax from certain payments where the prescribed tax tables don't cater for a particular situation.

While a tax directive will grant you relief in cases where the application of the ordinary tax tables will create hardships and enable your business to have cash flow available, there are drawbacks to tax directives.

Six reasons why tax directives can be risky for your business

#1: Tax directives are never 100% accurate as your income and deductible expenses may change throughout the tax year.

So regard the calculations according to a tax directive as a mere estimate. You may still have to pay in substantial amounts or a credit may be due to you once your final liability has been determined on assessment.

#2: Tax deducted from a lump sum payment doesn't represent your final liability – it's only a withholding amount.

#3: You may still have to pay in substantial amounts once the final liability has been determined on assessment.

#4: A low percentage tax directive may result in a huge tax debt on assessment.

#5: You may enjoy the increased cash flow but risk deferring your tax liability to a later date.

#6: You're likely to increase your chances of being audited by SARS if you have a fixed percentage tax directive.

There you have it. Take these reasons into account before requesting a tax directive.

Labour and HR Club - question of the day

Absence Of An Employee
Question: We have an employee who’s been working for us for 6 months. She’s been more off from work than present in these 6 months. She has the same doctor that books her off without a specific reason. Other days, she goes for an appointment and stays away 3-4 hours. There is a lack of trust from an employer side and not sure what to do. She said yesterday the doctor is worrying about her condition after her appointment BUT we don't know what the condition is. What can we legally do as
Answer: It remains the employee`s responsibility and right to choose to disclose her condition to you. You c... read all answer here

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Hendrik Johannes de Bruyn 2015-02-03 12:28:41

I am going to start receiving Commission on selling property through a registered Estate agency. I need to know what my Tax rate re: PAYE will be. Please advise. I was also asked to get a TAX directive from SARS?? Regards, Bruyn

Angela 2014-07-30 16:05:33

good day
I took my previous employer to the ccma for an unfair dismissal.According to our settlement agreement 17000 less tax should be paid 31 July and 30 august. The ex employer sent me my first payslip along with a sars tax deduction directive please advise of how much is taxable by the ex employer?

Quintin 2014-04-15 10:54:59

Hi guys. I am a sales rep and earn commission on a monthly basis. I want to apply for a tax directive for myself, but after reading your article I am not so sure if this would be wise. Will the above mentioned in the article also apply to me as the employee? Your feedback would be highly appreciated.

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