A tax directive is an instruction, from SARS, to employers, Fund managers (RA’s, provident etc) and even insurers to deduct employees’ tax, from a lump earned by taxpayer, at a higher rate than the normal tax rate. With the current pandemic in full swing, a few enquiries have come in regarding tax directives.
The more frequent tax directives are the following:
- Commission earners : To be taxed at a fixed rate, rather than at fluctuating rates. The onus stays on the taxpayer to ensure that all taxes are paid. As a commission earner, you will either get a refund or a heavy tax bill. Evaluate your tax liability every 3 to 4 months.
- Withdrawals from retirement funds : Should you only be transferring your funds, a tax directive would still be issued, but with a zero effect.
- Severance packages as well as CCMA cases.
- There are a few other cases and scenarios though, however, we listed the 3 most common ones our office deals with.
Different form types for different Tax Directives:
- IRP3(a) – Gratuities paid by employer (e.g. death / retirement / retirement due to ill health / retrenchment / other – to supply reason for payment).
- IRP3(b) – Employees’ tax to be deducted at a fixed percentage (commission agents / personal service company / personal service trust).
- IRP3(s) – Employees’ tax to be deducted on any shares or options.
- Form A&D – Lump sums paid by pension, pension preservation fund, provident or provident preservation fund.
- Form B – Lump sums paid by pension or provident fund (e.g. resignation / withdrawal / winding up / transfer / Section 1, Paragraph (eA) of the definition of gross income transfer or payment / future surplus / unclaimed benefit / divorce – transfer, divorce – non-member spouse / divorce – member spouse / housing loan / involuntary termination of employment (retrenchment) including withdrawals from a pension preservation or provident preservation fund).
- Form C – Lump sums paid, by a Retirement Annuity Fund, to a member, before retirement.
- Form E – Lump sums paid after retirement by an insurer or a fund.
- ROT01 – Recognition of transfer between two funds before retirement must be used where a benefit was transferred to another approved fund.
- ROT02 – Recognition of GN18 purchase of a member / beneficiary owned pension / annuity from an insurer must be used to acknowledge the purchase of annuities.
Something to remember:
- Should the taxpayer owe SARS any outstanding taxes (income tax and administration penalties), the outstanding amount will be settled, before any lump sum is paid out.
- Administration penalties are charged, by SARS, per the Tax Administration Act, for (not on) non-submission of tax returns. These penalties can easily accumulate to the thousands of Rands for just a few years of outstanding returns.
How do we apply or obtain a tax directive?
Tax directive can be online via https://www.sarsefiling.co.za/.
- After logging in -> “Services” (top right menu) -> “Tax Directive” (Drop-down menu on the left side of the screen).
- Tax practitioners can use the SARS practitioner emails
- Taxpayers can utilise the “email@example.com, for the applicable region (Centre, east, south etc).
– Salim Khan