Purpose of a tax directive
Paragraph 9(1) of the 4th Schedule prescribes that a tax directive (IRP 3) is issued by SARS to instruct the employer / fund how to deduct employees' tax from certain payments where the prescribed tax tables do not cater for certain remuneration or other payments.
Tax calculations according to the tax directive should be regarded as a mere estimate as 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.
The following rules relate to a tax directive —
- 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.
- Employers must apply the percentage of employees' tax as indicated on the directive prior to taking into account allowable deductions for employees' tax purposes (e.g. pension, retirement annuity fund contributions, etc).
Tax directives must be applied for in all the circumstances explained in the following paragraphs. Application forms [IRP 3(a), IRP 3(b), IRP 3(c) and IRP 3(d)] are available on the SARS website and at the SARS offices.
Reasons and application forms for tax directives
Application forms have been developed for purposes of applying for a specific tax directive and all these application forms are available on SARS website www.sars.gov.za. Form A & D, Form B and Form C serve as an example of the form layout. Fund administrators must add their own logo and address when submitting the applications forms to SARS offices.
When applying for a tax directive, 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 nature of the amount payable to the employee / member of the fund.
- IRP 3(a) Gratuities paid by employer (e.g. death / retirement / retirement due to ill health, superannuation & other / retrenchment / share options without obligation / in service payment within 5 years of retirement / 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 and / or provident fund. (e.g. death / ill health / retirement / provident fund – deemed retirement / unclaimed benefit).
- Form B – Lump sums paid by pension and / or provident fund on resignation / withdrawal / winding up / transfer / Section 1, Paragraph (eA) of the definition of gross income transfer or payment / surplus apportionment / unclaimed benefit).
- Form C – Lump sums paid by a RAF to a member (e.g. death before retirement / death after retirement / ill health / retirement / transfer from one RAF to another / unclaimed benefit).
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:
o Tax year;
o Personal detail of the employee / member of the fund —
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. 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 application forms (minimum information required):
- The fund approval number (number starting with 18204 plus 6 numeric values);
- The PAYE number of the fund ;
- The membership number or policy number;
- Type of fund (pension / provident / 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 ofthe 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 ofinsurer 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.
The relevant income and expense statement and / or other relevant documentation must accompany the application form if the IRP 3(b) / (c) / (d) application forms are submitted.
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.
