How to submit an EMP501

The EMP501 is a bi-annual reconciliation which is submitted in October (ex: March 2021 to August 2021) and May (ex: September 2021 to February 2022). It is a reconciliation to match Payroll figures (IRP5’s) to the Monthly EMP201’s and both to agree to the Monthly payments made.


There are 2 ways of submitting:

1) Via E-Filing
Recommended for less than 10 employees.

2) EasyFile

a. A program, which can be downloaded from E-Filing’s home page or the SARS website.
b. Easy to use, but sometimes not all the needed software is downloaded. Quick fix normally.

For both of the above:

  • A payroll file can be imported, although, with EasyFile, this process is a lot smoother.
  • IRP5’s can be manually entered, if there is NO formal payroll system.

How to obtain the payroll file:

Every payroll system will have a specific file that can be imported into EasyFile. Can be a .txt file or a .csv file – System dependent.

For Pastel Payroll and Sage Payroll Online, you will find the options under Reports or Tax certificates.

For VIP -> History -> Reports.

Ensure the following is selected:

a. the correct year
b. Mid-year or Year end
c. Live submission

Resolve any issues.

For manual submissions:

Payroll systems would allow you to select tax codes. E-Filing does not provide a search option for tax codes, but can be searched for on SARS’s website. It is advised that only to a maximum of 10 employees be done manually on E-Filing.

Submission via EasyFile:

This section assumes that EasyFile has already been set-up.

  • Open up the selected company.
  • Firstly select Import/Export Payroll File and Pop-up will show. Select Import and search for the payroll file.
  • Follow prompts.
  • Nothing and no forms will open.

  • Next, select Declaration, 2nd the period and 3rd “Request”.

  • A pop-up menu will appear with 3 options:

1) Accept Data

a. A pop-menu requesting log in.
b. This is the same Log Ins for your E-Filing profile which was used to submit the EMP201’s.
c. The EMP501 form will open

2) Own Values

Two options :
i. Request SARS Data: same process as nr 1, above.
ii. Request own Values: you will have to enter figures manually.

  • The EMP501 form will open:

Now for all the different columns:
– PAYE, UIF SDL pulls through from the EMP201’s you have submitted.
– Payments need to be added manually.

a. These MUST agree to what you paid.
b. EXCLUDE interest and penalties.



  • Click on File.
  • Next, go to “Submissions” (Left side menu) and click on “Submit”.
  • Select the applicable form (Should only be one).
  • Say Submit.
  • EMP501 and IRP5’s will print.

And you are done!

Submission via E-Filing:

  • Ensure that the EMP501 profile has been activated.
  • Go to -> Returns (Top Menu) -> Returns Issued (left-side menu) -> EMP501.
  • Right-hand side, select the period (if mid-year then “current year” -08”)

Example : If we are in 2021 and we are doing the 2022 mid-year submission (done in October), then we select 202108.

  • Click on :” Request Return” and Open.

  • Select EMP501 on the following page:

  • Fill out the Contact person details:

  • LEAVE Financial Particulars for now.
  • Select “My Tax Certificates” -> “Add” -> Click anywhere on the GREY area.

  • Input all the information until you get to the : ”Tax Certificate Information” – Section.

  • Complete the ”Tax Certificate Information”.
  • You will need to have codes for:

– Gross salary (3601).
– Annual lump sums (3605).
– Medical aid (3810).
– Logbook (3701).

– Employer medical aid contributions (4474).
– PAYE (4102).
– UIF {Employee portion + Employer portion} (4141).
– SDL (4142).

  • After completing the above for ALL employees, go back to the top menus and select: “My Reconciliation Declaration”.
  • Go to : ”Financial Particulars” – bottom drop down menu.
  • Now for all the different columns:

– PAYE, UIF SDL pulls through from the EMP201’s you have submitted.
– Payments need to be added manually.

a. These MUST agree to what you paid.
b. EXCLUDE interest and penalties.



  • After entering all payments and providing a reason for any over/unders, you can click “SUBMIT” at the top of the form.


– Salim Khan

Medical Aid and medical expenses

In this article, we wish to simplify and explain when and how claimed medical expenses – SPECIFICALLY out-of-pocket expenses – will be allowed as a deduction.

Medical expenses (NOT the tax credits) are based on taxable income AFTER ALL OTHER deductions (RA, Pension, Rental profit/loss and trading profit/loss.)

Medical tax credits (MTC):

MTC is technically the last calculation, but the most well-known and the reason a salary-earner will most likely not see a tax refund, purely based on the Medical Tax Credits.

As an employee of a company and with a medical aid benefit (it forms part of your salary package), the Medical Tax Credits, will cause a reduction in your monthly PAYE.


  • Your monthly PAYE (before the MTC) is R3,000.
  • You and your spouse are on your medical aid.
  • The monthly MTC for you both is : R664 (R332 for main member and R332 for 1st dependent).
  • Your monthly PAYE will be reduced to R2,336.
  • You get a monthly benefit.

Should your medical aid be out of your own pocket and /or you pay on behalf of someone who is related and dependent (Either on your medical aid or they are on their own medical aid), your MTC will be a lump sum at the end of year.

For sole proprietors:

You can always set-up a payroll system for yourself and bring these into calculation. MTC is a TAX reduction, NOT an expenses. Meaning, it comes off the actual Tax portion.


  • If your annual tax was : R20,000.
  • PAYE was R11,000.
  • MTC = R332 (just you) x 12months = R3,984.
  • Your tax payable would be : R5,016 (R20,000 – R11,000 – R3,984).



Medical tax credits after the 1st dependent is calculated at R224 (2021 to 2022 tax years) per dependent. A dependent is someone who is related to you or, in the case of children, also adopted. A dependent also includes your spouse or parent and in the latter, some rules do apply.

As for children:

On the last day of assessment (28/29 February) was alive and NOT:
Married and

  • Over the age of 18 years.
  • Over the age of 21, except:

– Wholly or partially dependent on their parents for their livelihood
– Did not become liable for income tax.

  • Over the age of 26, except:

– Wholly or partially dependent on their parents for their livelihood.
– Did not become liable for income tax.
– Full-time student and an educational institution.

The exception to all of the above, is when a child has a disability and wholly or partially dependent, on the taxpayer, for their livelihood and well-being.
– Also, did not become liable for tax.

Also allowed are:

  • Nursing homes.
  • Mid-wives.
  • Stay-in caregiver salaries and

– Stay-in expenses are limited to 20% of the national minimum wage for electricity, food and water.
– Training and related expenses.

Medical aid contribution:

Only contributions paid to any registered medical scheme OR a “registered under provisions similar to the provisions of the MS Act in the laws of any other country” {SARS LAPD-IT-G07, ISSUE 13}”. Meaning even if you belong to a foreign medical scheme and its Legislation is similar to South Africa’s Medical Scheme Act, you can claim the contributions. THEREFORE: medical insurance, will NOT be allowed. This also includes GAP covers, however, if you had to make a co-payment, to a hospital and this was NOT recovered from your medical aid, then it can be claimed under OTHER MEDICAL EXPENSES PAID OUT-OF-POCKET.
But do not expect this co-payment claim, to make a difference in your tax calculation.

Medical expenses paid out-of-pocket:

Let us get through what does qualify:

  • Any amount NOT recovered from the medical aid.

– If you are not on a medical aid this is not applicable and the below would be:

  • Paid out of your own pocket (or your spouse’s if on the same medical aid).
  • Medicine, which a registered medical practitioner, provided a prescription for.

– Lenses also fall under this section.

  • Payments made to a hospital for hospitalisation.
  • Payments to registered medical practitioners:

– GP
– Paediatrician
– Other specialists (oncology, anaesthetist, dentist, cardiologist, etc.).

The above ONLY qualify for the calculation to determine what can be deducted from Taxable income.

For any disabilities:

  • The relevant medical practitioner needs to complete an ITR-DD.

– This form is for mental and physical disabilities.
– The expense will only qualify if it was necessarily incurred and paid by the taxpayer.
– And either the taxpayer or a dependent, must have the disability.
– For more information look on SARS’s website for:

  • List of Qualifying Physical Impairment or Disability Expenditure; Annexure B.

Some exception which does get included:
Physical impairment (broken arm, leg, eye injury etc) expenses can be claimed, even for over the counter medicine, as long as the medicine is on the Prescribed medicine list of the Act. Your medical practitioner would most likely have provided a script, if not, have proof of your impairment and the related medical expenses.

Calculation for allowed medical expense portion:

For a taxpayer that is:

  • Over 65 and/or
  • Has a disability.

– You do not have the worry about the 7.5% rule.
– The 7.5% rule is for all other taxpayers.
– The 7.5% relates to all medical expenses paid (out-of-pocket and not recoverable), must exceed 7.5% of your taxable income, BEFORE being taken into account for the ALLOWED portion calculation.

Calculation for taxpayers Over 65 and/or with disability:
All qualifying expenses are brought into the calculation as follows:

  • Allowed medical expense deduction = 33.3% x {[A – ( 3 x B )] + c}.
  • A = Fees paid to medical scheme.
  • B = Medical tax credits (annual amount).
  • C = Qualifying medical expenses.

As you note, if your medical aid contributions are less than Three (3) times your medical tax credits, you are already at a disadvantage when it comes to your medical expenses.

Calculation for all other taxpayers (Under 65 and/or without disability):
All qualifying expenses are brought into the calculation as follows :

  • Allowed medical expense deduction = 25% x {([A – ( 4 x B )] + C) MINUS (7.5% x D) }
  • A = Fees paid to medical scheme.
  • B = Medical tax credits (annual amount).
  • C = Qualifying medical expenses.
  • D = Taxable income (Excl. lump sum retirement or severance).

As you note, if your medical aid contributions are less than FOUR (4) times your medical tax credits, you are already at a disadvantage when it comes to your medical expenses. ONLY the medical expenses OVER AND ABOVE 7.5% of taxable income is considered as a deduction, but limited to 25%.


  • Taxable income = R150,000
  • Medical expenses = R25,000
  • Tax credits = R3,984

– R150,000 x 7.5% = R11,250 : All medical expenses over and above this amount will be brought into calculation; therefore
– R25,000 – R11,250 = R13,750 of your medical expenses are now considered.

NOT on medical aid:

Medical expense allowed:

= 25% x {( A – ( 4 x B) + C }
= 25% x {( zero – (4 x zero) + 13,750}
= 25% x 13,750
= R3,437.50 is allowed as a medical expense.

ON medical aid:

  • Contributions = R25,000 for the year.
  • One member – no depedants.

Medical expense allowed

= 25% x {( A – ( 4 x B) + C }
= 25% x {( 25,000 – (4 x 3,984) + 13,750}
= 25% x {( 25,000 – (15,936) + 13,750}
= 25% x {9,064 + R13,750}
= 25% x 22,814
= R5,703.50 is allowed as a medical expense.

Should the 7.5% be MORE than {( A – ( 4 x B) + C }; the answer is ZERO and no NEGATIVE amount can be claimed.

– Salim Khan

Working from home: Capital Gain rules

With COVID restricting travel and employees with logbooks not being able to travel for business purposes, and who are used to getting a refund might have to prepare to pay taxes in this year. Claiming home-office expenses now will result in a capital gain for the period you claimed.

Do not be terrified of the Capital Gain concept.

Let use an example with figures and taking the above 10%:
• House cost was: R2,000,000.
• House was sold for: R2,500,000.
• Gain = R500,000: 10% of this will be subject to Capital Gain rules.

If the house is co-owned, this gain is split

NOTE : We ONLY look at the GAIN on the property.

Therefore, after the split or in 1 person’s name, the following happens :
• Split: R500,000 ÷ 2 = R250,000.
• One-person owner = R500,000.
• After this the 10% applies.

The difference of R450,000 (R500,000 less 10%) gets taken out of the R2,000,000 LIFE-TIME PRIMARY RESIDENCE allowance.

This 10% gets reduced by R40,000 (annual exclusion for all individual taxpayers).

So, if the house was co-owned: (R250,000 x 10%) less the R40,000 exclusion = R0 for capital gain.

If the house is in one person’s name: (R500,000 x 10%) = R50,000 less R40,000 = R10,000.
R10,000 x 40% (inclusion rate to determine taxable portion) – this gives us R4,000.

So, should you claim home-office expenses in the current, or future, tax year this R4,000 will be added to your taxable income, when you are selling the property.

What does this mean?

This R4,000 + salary + other income, CAN still be reduced by normal tax-deductible expenses: logbooks, RA’s, Medical Aid and medical expenses (rules apply).

Tax Season 2021 and home-office expenses do not have to be a concern, but be cautious and aware regarding what the implications are. Sad that so many companies did not adjust their payroll structure – if you have a logbook, you most likely will have a tax liability.

– Salim Khan

What is VAT and how does it work ?

A detailed explanation on the different types of VAT and their impact. We delve into when and how to claim as well as details for a valid tax invoice.


Types of VAT:

– Standard rate
– Zero-rated supplies
– Exempt


Standard Rate

VAT is calculated at 15% of the service or goods total and then added onto the service/goods total.

• Output VAT:

– When a company or an individual generates a sale or fee, it is considered Excluding VAT, and VAT is calculated on this revenue and then added onto it.
– The VAT Inclusive amount is considered, taxable goods – for VAT purposes. For INCOME TAX, the nett / Exclusive amount is recognised as revenue/sales/fees.
– This is the amount shown on the VAT201.
– Output VAT is what is owed to SARS.
– When the debtor/customer/client pays their account, you allocate the entire receipt against their account, BUT the VAT portion, belongs to SARS and is due to SARS from the moment the invoice amount becomes receivable.

• Input VAT:

– Input VAT is VAT payable to service providers and suppliers as part of their invoice total.
– Input VAT is calculated and claimed on the following :
• General expenses (with limitations)
• Capital goods purchased (with limitations)
– Therefore, when payment is made on an invoice (or at the till a shop or supermarket), the total amount paid, includes the VAT portion
– Input VAT is deducted from the Output VAT declared, in order to determine the final VAT balance owing to SARS

When are goods exempt from VAT and when are they zero-rated? Why are they zero-rated or exempt?

Both exempt and zero-rated items may have a 0% rate on your accounting software, but the difference needs to be understood. It is also important to know that just because the items are zero-rated or exempt from VAT, it does not mean the items are not taken into account for income tax.
Input VAT cannot be claimed on fuel or interest paid, but should these be business expenses, the expense can be claimed for income tax. Should a service or sale, to a foreign business be invoiced, there is no VAT being charged, but the income is taxable for income tax.


The most popular items are:

• Sales or services to foreign countries.
• Basic food items:

– Brown bread.
– Milk.
– Fresh paprika (dried paprika has VAT).
– Agricultural goods: maize, corn, dried mealies, etc.
– Fuel.

The idea behind basic food items not carrying VAT, is to make these items more affordable for households, with lower incomes. Farmers are also able to obtain/purchase seeds, etc at a zero rate.


Also at a rate of 0%, but consists of the following items:

• Finance services (excluding bank fees):

– Interest.
– Long-term insurance.

• 3rd party companies or individuals who earn commission on the sale of policies can register for VAT and will have to register for VAT if their revenue exceeds R1million.
• See Section 2(1) of the VAT Act

• School fees.
• Public transport.
• Residential accommodation.

– The landlord cannot charge VAT or claim VAT on services (commission to agents, repairs, etc.).– Needs to pay the VAT, but cannot claim it from SARS.

– This excludes B&B’s, hotels and other relevant accommodations, where the accommodation is a service and not for a primary residence.


Expense and capital items purchased:

When can and when can we not claim input VAT?

1) When the service provider / supplier is NOT registered for VAT.
2) When the service or goods is either :
i.  Zero-rated
ii. Exempt
3) When VAT is strictly not allowed :
– Petrol and diesel 
i. There are exceptions, but rule-of-thumb is NO VAT may be claimed.
 – Staff welfare and refreshments
i. Water for the water cooler
ii. Tea, coffee, milk, sugar, etc
iii. Fast foods when traveling
– Entertainment 
i. Taking clients or staff out or for office consumption
ii. The exceptions here are when the company/individual earns commission or is strictly in specific industries
– Goods purchased from foreign countries :
i. The exception :
There may be customs VAT on the invoice which is at a higher rate than 15%


Input VAT on Capital Goods: 

Capital goods are generally a single item with a value of over R7,500 (excl. VAT).
– Eg. Seven chairs at R1,500 each totals: R10,500. Individually, they are not considered.
They can still be shown on an asset register, but then fully written off.
Input VAT on capital goods is disclosed separately on the VAT201 and is added to the Input VAT as mentioned above.
When can Input VAT NOT be claimed on capital goods?
1) When the service provider / supplier is NOT registered for VAT.
2) Vehicles :
– Double cab bakkies
– 4-door passenger vehicles (with exceptions)
– Mini-busses (with exceptions)
These are the most common, general examples.


Information needed for valid invoice:

There is quite a bit of information needed, on an invoice, to make it a valid tax invoice. Without the below, your VAT claim will be dismissed and your VAT liability will increase:

1) Details for both supplier and purchases :
– Full company names (or an individual’s name and surname)
– Addresses
– VAT numbers
– Contact details are a bonus, but not a strict requirement.
2) Other details on the invoices :
– Date on which the invoice is issued
– Clearly be shown how the pricing is calculated
– Exclusive amount must be clearly stated
– VAT percentage and amount must be clearly shown
– Inclusive amount must be shown

3) Description of services / goods to be clearly shown as well as whether calculated price already Includes or excludes VAT. This relates to individual line-items and separate descriptions within the body of the invoice.

– Salim Khan

Provisional tax

Provisional tax can be seen as a deposit a company or individual pays towards what their assessed would be once the annual tax return is done.


There are 3 provisional tax dates to be aware of:

  • 1st Provisional: 6months into the financial year.
  • 2nd Provisional: In the month of the financial
  • 3rd Provisional: 6months after the financial year.

All 3 provisionals get taken into account when penalties and interest for underpayment of provisional tax is calculated.

1st Provisional:

This is not always considered important in terms of accuracy, however, the higher the 1st provisional, naturally the lower you have to consider for your 2nd provisional tax return.

2nd Provisional:

This is considered the vital calculation seeing as all provisional tax has to be within 20% of total assessed tax, otherwise penalties will be incurred. This implies mainly when taxable income is higher than R1 million.

3rd Provisional:

This is not an actual return and just a payment done via e-filing.


  • After logging into , you will be on the home screen.
  • Select the taxpayer (if more than one company or individual on the profile)
  • On the left-side menu choose:
  • Payments: Create additional payment
  • “Tax type”: Provisional tax
  • Tax period : “year” & “03”
  • Example: 3rd provisional for 2020

Who must register and submit provisional tax returns?

– All companies (CC’s and Pty’s) are required, by law, to submit provisional tax returns. Directors and Members of companies. Individuals who earn any of the following:

  • High interest returns.
  • Rental income.
  • Income other and/or “over-and-above” their salaried income.

– Sole proprietors.
– Professionals not running as company (or a Personal Liability Company).
– Trading Trusts and Family Trusts.

What is required for the the Provisional tax return?

– Estimated turnover for the year.
– Estimated taxable income for the year.

How would we calculate the tax for the Provisional Tax Return?

We normally provide our clients (via our mandate which they have to sign) with 3 options:

1st option:

  • Always based on the prior year’s tax assessment and adding 8%.
  • For the 1st Provisional this amount is divided by 2.
  • For the 2nd Provisional, the 1st provisional is deducted to determine the amount to be payable for the 2nd provisional tax.

2nd option:

  • Client’s own estimate for what the taxable income and therefore, the tax would be.
  • Based on sales or projects.
  • Or just due to cashflow constraints.

3rd option:

This is based on the finalised accounting records for the period closest to the month, in which the Provisional tax submission becomes due.

Example: If the Financial year-end is February 2021. The 1st provisional would in August 2020. The profit until end of July 2020 will be used.

The profit is divided by the number of months that have passed for the financial year and then times by 12 – To get estimated annual profit. The same can be done for the turnover estimate, that needs to be filled in on the form, but this has no bearing on any penalties.

We then bring in specific transactions which may not have been taken into account OR which have not realised:

  • Interest on loan accounts.
  • Depreciation.
  • Potential sales and projects and the related costs.
  • 13th cheques or bonusses.

Tax is then calculate on the calculated profit – taking any current financial year provisional taxes, already paid, into consideration.

Use the applicable tax table:

  • For individuals, the sliding tax tables used for individuals.
  • If your company falls within the Small Business Corporation Rules, then use the applicable sliding tax table.
  • If the company is not Small Business Corporation the rate is 28%.
  • Trusts apply the 45% tax rate for taxable income, after distributions.

– Salim Khan

Remote Accounting support

We have introduced a new service to fill the gap for a lot of small- to medium businesses that process and handle their own accounts, but may:  


Not have the time to do in-depth reconciliations

  • Inter-company loans.
  • Director/Shareholder loans.
  • Balance sheet accounts.
  • Customer and Supplier account queries and variances.

Be unsure regarding VAT processes or how to adequately prepare and recon VAT

  • Easier ways to prepare VAT reports.
  • Confirm that VAT is accurate.

Want peace of mind that their records are correct and everything is in order

  • General account maintenance.
  • Lessen year end journals.
  • Assist in processing year-end journals.
  • Assist in processing complex journals (forex, sale of assets, etc).

Small Businesses who utilise Cloud Accounting software can utilise this service to ensure:

  • Accurate classification.
  • Bank recons are balancing.

Remote Accounting Services (RAS) is aimed at Small to Medium Enterprises who can perform the services directly on the client’s accounting software remotely (Ultra Viewer or Team Viewer or similar).

In essence it is a review service for Businesses, Entrepreneurs, Professionals and Sole Proprietors who maintain their own accounting records and prepare their own tax returns.

Should the client require the electronic device, the reports can be sent electronically, to us, in order for us to perform the work, while day-to-day tasks do not fall behind.


  • 1 Hour: R500.00/hr.
  • 2 Hours: R500.00/hr.
  • 3 Hour: R425.00/hr.
  • 4 Hours: R425.00/hr.
  • 5+ Hours: R350.00/hr.

Once-off fees are for clients who:

  • Are uncertain of their needs.
  • Only prefer the service during tax seasons and year-end finalisations.
  • Would like to get re-assurance that forms (VAT, Income tax, Provisional, EMP501’s) are prepared correctly.



  • 2.5 Hours over two months: R850.00 (R340.00/ph).
  • A contractual notice period of 30 days applies.
  • Hours not used cannot be carried over beyond the two-months period.
  • Additional hours required during the two-months period will be charged for at R400.00/hr.


  • 4 Hours over a period of one month: R1 150.00 (R287.50/hr).
  • A contractual notice period of 30 days applies.
  • Hours not used cannot be carried over beyond the one-month period.
  • Additional hours required during the two-months period will be charged for at R340.00/hr.


  • 9 Hours over a period of one month: R1 825.00 (R202.78/hr).
  • A contractual notice period of 30 days applies.
  • Hours not used cannot be carried over beyond the one-month period.
  • Additional hours required during the two-months period will be charged for at R250.00/hr.

Monthly fees are for clients who:

  • Have specific needs.
  • VAT needs to be monitored closely:
    – Internal reconciliations.
    – Submissions.
    – Follow-ups.
  • Sensitive Balance Sheet accounts need to be monitored.
  • Monthly management accounts are needed:
    – We will prepare these.
    – Monthly account movement inspection.
    – Monthly cashflow inspection.
  • Stay up to date on taxes that will become due.
  • Ensuring overall accurate classification of transactions.
  • Month-end journals.
  • Keeping asset registers up to date.

What is not included:

  • Monthly processing of accounts
  • Payroll preparation and submissions.
  • Preparation, compilation/Independent Review of Annual Financial Statements.
  • Actual submission and preparation of income tax returns.

– Salim Khan

What are tax directives and when to utilise them

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

  • 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 “, for the applicable region (Centre, east, south etc).

– Salim Khan

Taxation for Small Businesses

Small Business can be taxed at more favourable rates if they meet the specific requirements.


What are the requirements ?

  • Annual Turnover to be less than R20million.
  • Investment income must not exceed 20% of total income : This will include, but not limited to, rental income, interest & dividends, etc.
  • All shareholders are to be natural persons : No trusts nor any company to hold shares in the company.
  • Shareholders not to hold shares in any other companies (Private, Close Corporations, Personal Liability Companies) excluding Public Companies.
  • Directors are not be directors in any other business – The rules get quite sticky as it mentions that even if persons related to directors hold business interests, the company will be disqualified.
  • Personal services companies are disqualified as well : A personal services company gets taxed at 34% and is a company who received more than 80% of remuneration from one source.
  • Specific industries are also limited and can only start qualifying after having at least 3 employees, excluding the directors.

Although SARS does not ask all of these questions on the tax return; it should be abided by. Ok, so your company qualifies, what now? What tax benefits are there? The most important one, is that the company gets favourable tax rates, similar to individuals.

For the tax year 1 April 2023 to 31 March 2024, the tax rates are as follows:

  • R0 to R95,750 : Tax at 0%
  • R95,751 to R365,000 : Tax at 7% for the amount over R95,750 (meaning the first R95,750 of profit is tax-free and the profit to be taxed at 7% is calculated by deducting R95,750 from the profit.
  • R365,001 to R550,000 : Taxed at 21% on the amount over R365,000 plus R18,848 (which is the highest tax for the previous bracket)
  • R550,001 and above is taxed at 28% for the amount above R550,000 plus R57,698.
  • R550,001 and above is taxed at 28% for the amount above R550,000 plus R58,583.


Profit (taxable income if you want to be very specific) for the year : R400,000.

We will calculate the tax as follows : R400,000 less R365,000 = R35,000. This difference is then multiplied by the tax rate : R35,000 x 21% = R7,350, but we still have to add the maximum tax from the previous bracket to get our taxation payable. So, R7,350 + R18,848 = R26,198 will be our total tax payable on a profit of R400,000.

For the technical inclined: profit and taxable income are not always the same, as there could be expenditures which are allowed for accounting purposes, but not for taxation purposes. Example : SARS interest and penalties, fines, change in depreciation rates, etc.

Are there any other benefits?

Yes, there are. Mainly on the depreciation of assets. Consult with your accountant regarding the accounting implications as there might be a difference between you can claim for accounting purposes and for tax purposes.

A Small Business Corporation may choose to use the following rates for movable assets brought into use for the first time by the SBC:

  • Assets used directly in a process of manufacture or similar process: 100% of the cost in the year of assessment in which the asset is first brought into use.
  • Other qualifying assets: 50% of the cost in the year of assessment in which the asset is first brought into use, 30% in the first succeeding year, and 20% in the second succeeding year.

The Company (which includes Close Corporations and Personal Liability Companies) can also choose the normal rates (20% on machinery over 5years as an example).

– Salim Khan

The ins and outs of VAT registration

Mandatory registration must be done within 21days of exceeding R1million. Voluntary registration has been made easier with some additional rules.


Sales less than R1million, but more than R50,000 for the past 12months.

  • Trade has been longer than 2months, but not more than 11months, then the average of R4,200 of trade, for the preceding months. Example: if total earnings, for 5months were R25,000, then in month 6, you can register for VAT.
  • Trade for one month exceeds R4,200, voluntary registration can be done.

If no revenue has been generated, then there are 3 options available:

1. Contract stating that more than R50,000 will be made in the next 12months.   

  • As per a SARS branch manager, there must be full detail on the contract : Supply volumes, details of supplies/services to be rendered as well as the agreed upon price.
  • Signatures of both parties and preferably on the taxpayer’s customer’s letterhead.

2. Financial agreement with a bank, credit provider, non-resident or any other authority, where repayments in the following 12months will exceed R50,000.

3. Where expenditure – expense or capital in nature – will, or has, exceeded R50,000. As per a SARS branch manager : For capital goods, an on-site inspection will have to be done.


Even though registrations can be done via e-filing, the following documents will be required (however this will most probably vary based on the branch you visit as well as the type of registration):

  • Power of attorney (for tax practitioners).
  • Resolution passed where the company representative – as per the power of attorney – has indeed been appointed as the representative. YES, even it is one director.
  • Company registration docs – Official Company Disclosure from CIPC will suffice (latest).
  • Certified ID’s for all directors ( no older than 3months).
  • Proof of address for directors and entity.
  • Branches and call centre vary on this:

– Letter from the bank confirming details and/or
– 3 months bank statements.

  • Proof for the type of registration:

– Invoices to customers (and the bank statements to correspond).

– Written contracts.

– Finance agreement and proof of purchases.

An issue that occurs quite frequently is where a newly founded company – most of the time for the purpose of – wants to apply for a tender, but requires a VAT number in order to do so. This becomes quite complicated as none of the rules can be applied to a “maybe” or a possible income stream. This is an area where, we believe, tax authorities need to have a look on special conditions and/or terms.

– Salim Khan