I want to get a tax directive

What's New?

30 June 2017 - Enhancements to Tax Directives
Tax Directive enhancements have been implemented as a result of legislative changes. The enhancements to the directive application forms will enable Fund Administrators and Insurers to comply with the legal requirements. The IRP3(s) application is a new form addressing section 8A gains and section 8C amounts. The Recognition of Transfer and the Recognition of Purchase of an Annuity forms (ROT) can now be electronically submitted by the receiving fund.

The enhancements include:

  • New forms introduced:
    • The IRP 3(s) - Employees' tax to be deducted on any amount to be included under section 8A or 8C of the Income Tax Act is a new form and needs to be completed manually. This application form must be used by Employers where there are any amounts payable including any amounts under section 8A or 8C of the Income Tax Act. See our new Completion Guide for IRP3a and IRP3s forms.
    • The Recognition of Transfer (ROT) forms are available on eFiling. The purpose of a ROT is for the receiving fund to confirm receipt where a benefit moves from one fund to another or where a benefit was used to purchase an annuity. There are two types of ROT forms:
      • 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.

  • Existing forms were standardised and enhanced with the legislative changes:

What is the purpose of a tax directive?

The purpose of a tax directive is to enable SARS to instruct an Employer or 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:

Tax calculations according to the tax directive should be regarded merely as an estimate. Some employees may find that they still have to pay in substantial amounts or that a credit may be due to them once the final liability has been determined on assessment.

Application forms are available for specific tax directive types. Form A&B, Form B, Form C and Form E serve as examples of the form layout.

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.

Here is a complete list of applications forms available as of 1 July 2017:

  • IRP 3(a) – Gratuities paid by employer (e.g. death / retirement / retirement due to ill health / retrenchment / other – to supply reason for payment).
  • 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) – Decommissioned.
  • IRP 3(s) - Employees' tax to be deducted on any amount to be included under section 8A or 8C of the Income Tax Act.
  • Form A&D – Lump sums paid by pension, pension preservation fund, provident or provident preservation 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 (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 RAF to a member (e.g. death before retirement / retirement due to ill health / retirement / transfer from one RAF to another / discontinued contributions / future surplus / divorce – transfer, divorce – non-member spouse / divorce – member spouse / emigration withdrawal / visa expiry).
  • Form E – Lump sums paid after retirement by an insurer or a fund (e.g. Death Member / Former Member after Retirement, Par. (c) Living Annuity Commutation, Death - Next Generation Annuitant, Next Generation Annuitant Commutation and Transfer of an annuity to another insurer).
  • 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.

Employers or Fund Administrators may submit manual application forms to a SARS branch or submit the application forms electronically via an interface agent or register as an agent on SARS eFilng.

Minimum information required on the application form:

To avoid a delay in the issuing of a directive, the following crucial minimum information is required on all the tax directive application forms:

  • 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);
    • 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. 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). 

For more detailed information required on the Form A & D / B / C / E application forms:

Minimum information required on the IRP 3(a) / (b) / (c) / (s) application forms:

  • The PAYE number of the employer;
  • Date of accrual; and
  • Gross amount of lump sum payment or Gross value of gain / amount.

The relevant income and expense statement and / or other relevant documentation must accompany the application form if the IRP 3(b) or IRP 3(c) application forms are submitted. Please make sure that you use the latest version of the relevant form.

Refer to the Guide to Completion Guide for IRP3(a) and IRP3(s) Form for more detailed information required per application form.

Top Tips:

  • A tax directive is only valid for the tax year or period stated therein.
  • Employers may decline to accept 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.
  • Employers must apply the percentage of employees' tax as indicated in the directive prior to taking into account allowable deductions for employees' tax purposes (e.g. pension, retirement annuity fund contributions, etc.). Where the employer received a directive and the employee’s commission income is not more than 50% of the gross remuneration income the employer can ignore the directive instruction.
  • From an eFiling perspective, Tax Directive applications submitted before 1 July 2017 can be viewed, cancelled and printed under ‘Tax Directives –prior to 2017’ in the left hand menu on eFiling.
  • Electronic confirmation of receipt: From July 2017 the receiving fund of the transferred benefit or the Insurer where the annuity was purchased must electronically confirm the receipt of the transferred benefit or benefit transferred to purchase an annuity.  If the receiving fund cannot submit the Part B of the ROT electronically, the transferring fund is responsible to submit the manual comprehensive ROT (Part A and Part B) to SARS. 

Need help?

  • Call the SARS Contact Centre on 0800 00 7277.
  • Visit your nearest SARS branch.
     

 

Last Updated: 11/10/2017 11:44 AM     print this page
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 Top FAQs

Who should request a tax directive?
Form A&D, Form B, Form C and Form E can only be completed by the fund administrator or insurer. IRP3(a) must be completed by the employer.

What relevant material is required to request for a tax directive?
For Emigration withdrawal the Retirement Annuity Fund administrator must complete a manual Form C and the following documents must be attached to the Form C and submitted to a SARS Branch Office for consideration

Why is it necessary to request a directive application?
Fund administrators / insurers and employers are required in terms of paragraph 9(3) of the Fourth Schedule to the Income Tax Act to apply for a directive for any lump sum payable.

How long is a tax directive valid for?
A tax directive is only valid for the tax year or period stated on the directive.

How do I calculate the tax-free portion of a lump sum received or accrued on or after 1 October 2007 on retirement?
With effect 1 October 2007, Formula A was repealed. The definition of formula B has been amended and the symbols in Formula B (Z=C+E-D) represent the following: