The Fourth Schedule to the Income Tax Act No. 58 of 1962 states, among other things, that employers are required to:
- Deduct or withhold employees’ tax from remuneration;
- Pay the amount deducted or withheld to the South African Revenue Service (SARS) monthly on or before 7th of the following month;
- Reconcile employees’ tax during the annual and the interim reconciliation; and
- Issue tax certificates (IRP5s/IT3(a)s) to employees.
The submission dates of the employer reconciliation are prescribed by an annual income notice in the Government Gazette.
SARS’s 2022 Employer Interim Reconciliation Declaration (EMP501) submission period officially opened on 19 September 2022 and closes on 31 October 2022.
Most salaried taxpayers pay tax through Pay As You Earn (PAYE), which is deducted from their salary by their employer, who pays the tax over to SARS.
Employers must submit their monthly employer declarations (EMP201) to SARS. The EMP201 declaration equates to a self-assessment. The employer must calculate and declare the total tax liability, which includes employees’ tax, skills development levies (SDL), unemployment insurance contributions (UIC) and employment tax incentive (ETI) amounts (if applicable) for each tax period.
During the employer reconciliation process, employers are required to submit an EMP501 declaration and employees’ tax certificates that reconcile the employees’ tax deducted or withheld from remuneration with the payments made to SARS, including the total tax value of employees’ tax certificates for the respective period.
The reconciliation process allows an employer to review the total EMP201 declarations and if any discrepancies are identified, these must be corrected when submitting the EMP501. The values on the tax certificates, plus the EMP201 declarations, plus actual payments made to SARS should balance.
The interim reconciliation process introduced in September 2010 has become an integral part of the employer reconciliation and assists employers by:
- Enabling an easier and more accurate annual reconciliation submission;
- Maintaining an up-to-date employee database;
- Registering employees for income tax purposes. SARS offers the SARS registration function via eFiling, which allows employers to submit employee income tax registrations to SARS.
In addition, SARS is now taking steps to automatically register all individuals for personal income tax if, according to third party information available, there is an indication of economic activity and the individual is not registered.
Available submission channels are either SARS eFiling or SARS e@syFile™ for employers with fewer than 50 employees, or by using e@syFile™ Employer for employers with more than 50 employees.
The submission of the EMP501 reconciliation for a specific period must be submitted through one channel only, i.e., if employers elect to submit the EMP501 Reconciliation through e@syFile for period e.g., 202208, the employer cannot revise the submission through eFiling, or vice versa. However, the employers have the option to elect a different channel for the submission of the next filing period.
Accuracy and on-time filing of EMP501s is critical. SARS uses the information it receives through the employer’s submission of an EMP501 to populate the tax returns of the employees and, if the employees are part of SARS’ auto-assessment population, to populate their assessments. Incomplete or inaccurate information will negatively affect employees’ ability to meet their tax obligations. In practice, an employer’s incomplete or inaccurate information may result in significant delays of refunds to your employees where due.
If an employer submits the EMP501 late, administrative penalties will be charged. The penalty will equal 1% of the year’s PAYE liability, which will increase each month by one percentage point up to 10% of the year’s PAYE liability.
Furthermore, an employer who willfully or negligently fails to submit an EMP201 or EMP501 return to SARS is guilty of an offence and is liable, upon conviction, to a fine or imprisonment for a period of up to two years.
