Tax Directive Changes
43984, 16 Sep. 2015
Tax Directive changes
Sections 9(2)(i) and 10(1)(gC) of the Income Tax Act have been amended with effect from 1 March 2015 to include lump sums and the changes are now in place.
The exemption in terms of section 10(1)(gC) is applicable to a resident where services were rendered outside South Africa (SA).
Section 9(2)(i) is applicable to a non-resident where services were rendered inside SA to tax the portion of the lump sum amount relating to the services that were rendered inside SA.
The following forms are available to complete:
- The pension, pension preservation, provident, and provident preservation fund administrators or trustees must use Form A, Form B or the Form E application forms to apply for a tax directive, depending on the reason for the directive.
- The retirement annuity fund trustees or administrators must use Form C or Form E application to apply for a directive.
- Insurers must use the Form E in respect of living annuities.
What is the purpose of a tax directive?The purpose of a tax directive is to enable SARS to instruct an employer / fund administrator how to deduct employees' tax from certain payments to a taxpayer or for a fixed tax rate for an individual who earns commission income.
Employers and fund administrators can request a tax directive from SARS via the following channels:
- At a SARS branch – complete the correct form from the list below and submit it at your nearest SARS branch with the relevant supporting documents. Form A&D, Form B, Form C and Form E can only be completed by the fund administrator or Insurer and IRP3(a) only by the employer.
- eFiling – employers and fund administrators can log in and request a directive online.
- Register as an Interface agent. (Refer to the Tax Directive Interface specification (IBIR006))
Application forms have been developed for a specific tax directive. Forms A&D, B, C & E serve as examples of the form layout. Fund administrators can develop their own application form but must add their own logo and address when submitting the applications forms to SARS offices.
The employer / fund administrator must ensure that the correct application form is used according to the reason for the exit from the fund / employer’s service and the nature of the amount payable to the employee / member of the fund.
These are the applications forms for the specific purpose of a tax directive:
- IRP 3(a) Gratuities paid by employer (e.g. death / retirement / retirement due to ill health, / retrenchment / share options without obligation / / other).
- IRP 3(b) – Employees' tax to be deducted at a fixed percentage (e.g. commission agents / personal service company / personal service trust).
- IRP 3(c) – Employees' tax to be deducted at a fixed amount (e.g. Paragraph 11 of the 4th Schedule (hardship) / assessed loss carried forward).
- IRP 3(d) – Determine deemed remuneration to be used to deduct employees' tax (e.g. Paragraph 11 of the 4th Schedule (hardship) / Paragraph 11C(1)(ii)(bb) of the 4th Schedule)
- Form A & D – Lump sums paid by pension or provident fund. (e.g. death before retirement / retirement due to ill health / retirement / provident fund – deemed retirement ).
- Form B – Lump sums paid by pension or provident fund on 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 / termination of employment (retrenchment)).
- Form C – Lump sums paid by a RAF to a member (e.g. death before retirement / retirement due to ill health / retirement / transfer from one RAF to another / unclaimed benefit / discontinued contributions / future surplus / divorce – transfer, divorce – non-member spouse / divorce – member spouse / emigration withdrawal).
Minimum information required on the application form:To avoid a delay in the issuing of a directive, the following minimum information is required on the application form:
- Tax year;
Personal detail of the employee / member of the fund, such as:
- Surname and full names;
- Date of birth and ID number or other unique number (e.g. passport number, work permit number or non-resident identity number);
- Annual income (e.g. annual equivalent of current tax year’s income or the total remuneration for the last 12 months), not applicable for the Form A&D, B, C and E with date of accrual after 1 March 2009.;
- Physical address and postal code; and
- Postal address and postal code;
- Income tax reference number [if the income tax reference number was not entered, the reason for non-registration (e.g. SITE, unemployed) must be supplied];
- Name of employer or fund;
- Postal address and postal code of employer / fund; and
- Reason for directive (the relevant reason must be marked on the application form).
Form A&D / B / C / E application forms (minimum information required):
- The fund approval number (number starting with 18204 plus 6 numeric values) not applicable on form E;
- The PAYE number of the fund;
- The membership number or policy number;
- Type of fund (pension / provident / pension preservation / provident preservation / retirement annuity);
- Fund created reason (approved fund, public sector fund or other);
- Date of accrual;
- Date on which the member became a member of the fund;
- Gross amount of lump sum payment (including the amount deemed to be accrued in respect of Paragraph 2B of the Second Schedule);
- Gross amount of total benefit / total value of full annuity;
- Amount attributed to a non-member’s spouse in respect of a divorce order;
- The relevant questions on form A&D must be answered to indicate if the calculation of the benefit is in terms of employment or membership; and
- Indication on form A&D if funds are available to provide the member with an annuity; or
- will the funds be transferred to an insurer to provide a living annuity (name of insurer and the amount transferred must be provided).
IRP 3(a) / (b) / (c) / (d) application forms (minimum information required):
- The PAYE number of the employer;
- Date of accrual; and
- Gross amount of lump sum payment.
Employers or fund administrators may submit manual application forms to SARS office or submit the application forms electronically via an interface agent or register as an agent on the SARS website www.sarsefiling.gov.za.
- A tax directive is only valid for the tax year or period stated thereon.
- Employers may not act upon photocopies of directives.
- Employers may under no circumstances deviate from the instructions of the directive.
- Tax directives issued to electronic clients via the SARS Interface are valid directives.
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