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Three types of employee tax certificates you must know about and when to use them?

by , 13 August 2013
When you issue tax certificates to your employees they must correct. Get them wrong and you'll be liable for administrative penalties and possibly trigger an audit of your business. Read on to discover the three types of employee tax certificates you need to use and when to use them so you can avoid penalties.

An employee's tax certificates is your employee's proof to SARS that she earned a certain  annual salary and that she paid the required taxes over to SARS, says the Practical Tax Loose Leaf Service.

That's why it's so important you give your employees their tax certificates within the following prescribed time periods:

  • For your regular employees, within 60 days after the end of the tax year.
  • Within 14 days of termination of employment if the employee has left your company
  • Within 7 days of closing your business

It's important to know the different types of employee tax certificates so you can use them correctly. This'll ensure you avoid SARS penalties.

Revealed: Three types of employee tax certificates and when to use them

The three types of employee tax certificates are:

  1. The IRP5;
  2. The IT3(a); and
  3. The ITREG.

According to the Practical Tax Loose Leaf Service, the IRP5 and IT3 (a) certificates are now combined into one form .You can issue either as an IRP5 certificate or an IT3 (a) certificate.

You decide which one to issue to an employee, depending on whether or not you deducted employees' tax from the employee.

If so, then give him an IRP5.

If not, then issue an IT3 (a).

You'll use the ITREG to register your employees for a tax reference number.

Keep in mind that you must issue an IT3(a), not an IRP5 if you made these five payments:

#1: Foreign employment income that isn't subject to the deduction of employees' tax.

#2: Remuneration that doesn't exceed the tax threshold. The current threshold is:

  • R63 556 for employees younger than 65; or
  • R99 056 for employees older than 65; and
  • R110 889 for employees (if older than 75) per year.

#3: If your employee earns less then R2 000 per year, you don't need to submit an IT3 (a) at all.

#4: Lump sum payments (not otherwise reflected on an IRP5 certificate) from which you haven't deducted any tax. This usually happens in cases where SARS has issued you with a tax directive telling you not to deduct tax from that lump sum.

#5: Directors' remuneration that has only been determined in the following tax year. Remember, in some cases, directors will only find out how much their salary is once the company's profits etc have been declared.

Remember, SARS' systems are designed to pick up any errors on your employee tax certificates. Know what the three types of employee tax certificates are and when to use them to ensure you don't suffer tax penalties because of a silly error.



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