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I want to get a tax directive

What's New?

  • 23 April 2018 – Enhancements to Tax Directives
    The tax directive simulator (Quoting system) is now in operation. Only the institutions and the employers that can submit tax directive applications can at this stage use the tax directive simulator. The enhanced tax directive application forms as a result of legislative changes are available and the Employers / Fund Administrator / Long-term Insurers should use the updated forms for manual applications. 

  • 27 March 2018 - Tax Directives Trade Testing and Go-live date
    SARS will introduce enhancements to Tax Directives on 20 April 2018. Trade testing for ISV submissions may start now. This is necessary to prepare for the go-live date of 20 April 2018.

    You are encouraged to participate in the trade testing so that the submission of your files will run smoothly when the new Tax Directives changes have been applied.

    Follow these easy steps:

    Step 1: Before testing can commence you will need to email 10 taxpayer reference numbers to ncts@sars.gov.za to ensure the numbers are active. In the email subject line, use “Tax reference numbers for Trade Testing”. A max of 10 taxpayer reference numbers will be allowed. You will be notified via the same email address to proceed with testing by submitting the files.

    Step 2: To ensure compliance with the IBIR-006 specifications, SARS will randomly select IRP3’s generated from the submitted taxpayer reference numbers and request you to send the IRP3 for reviewing. If it does not conform to the SARS standard, electronic submission to SARS will not be allowed. For more information on the layout, kindly refer to the ‘Processed Directives Response Data Record’ and ‘IRP3 FORM HARD COPY EXAMPLE’ in the IBIR-006 -Tax Directive Interface Specification.

    For any queries about trade testing, you may email ncts@sars.gov.za.
  • 22 January 2018 - Tax Directives changes for 2018

System enhancements and legislative changes based on the Taxation Laws Amendment Bill, promulgated on 18 December 2017 will be introduced for Tax Directives on 20 April 2018. The updated IBIR-006 -Tax Directive Interface Specifications (version 5.602) is now available. This version reflects changes resulting from the new legislation as well as enhancements to tax directive processes and systems. 

Introduction of the tax directive simulator
A tax directive calculation simulator that will enable fund administrators to request simulated calculations prior to submitting the application for the actual directive will be introduced. Simulations and actual directives will be processed frequently throughout the day but must be in separate files.

Disclaimer: The simulated tax directive calculation is merely an indication and may differ from the final tax directive should the taxpayer receive other lump sums in the interim or should any information change.

Legislative changes:

Transfer from a pension or provident fund to a Retirement Annuity (RA) fund on retirement
The new legislation will allow for the transfer of the retirement benefit from a pension or provident fund to a Retirement Annuity fund (RAF) on or after the member attains normal retirement age.

Preservation of vested rights (pre-1998) – (Paragraph 5(1)(e) and Paragraph 6(1)(b)(v) of Second Schedule to the Income Tax Act)
You will now be allowed to transfer a public sector fund benefit to one approved fund and subsequently to another approved fund without the loss of the pre-1998 vested right.  This is only applicable to transfers to the subsequent fund after 1 March 2018.

Legislative changes reflected in directive forms:

  • Addition of a new directive application reason on the Form A&D
  • Addition of additional fields on directive application forms B, C and E
  • Enhancement of the Recognition of Transfer forms (ROT01 and ROT02) to accommodate the differences in amounts during the transfer process of the amounts.

All the new fields and / or containers are described in the IBIR-006 -Tax Directive Interface Specifications (version 5.602).

What is the purpose of a tax directive?

The purpose of a tax directive is to enable SARS to instruct an Employer, Fund Administrator or Insurer 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, Fund Administrators and Insurers 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 according to the information on SARS tax directive system. 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 / Insurer 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, Fund Administrators or Insurers 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, fund or insurer;
  • Postal address and postal code of employer / fund / insurer; 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: 25/04/2018 10:23 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: