The publication of the second edition newsletter coincides with the start of the new fiscal year. In keeping with the South Africa Revenue Service (SARS) objectives of providing clarity and certainty, as well as making it easy for taxpayers and traders to comply with their tax obligations, SARS continues to make a concerted effort to educate, inform, and encourage compliance with your tax obligations, as most businesses and individuals are working hard to recover from the COVID-19 pandemic and the resulting economic challenges.
Small businesses are encouraged to visit the small business webpage on Small-businesses-Employers and/or SARSTV channel on YouTube for a host of useful education material such as webinars, simplified leaflets and videos designed to demystify tax, and provide much needed guidance to SMMEs to improve tax compliance. The months of April-May marks the annual employer reconciliation period, which is critical in preparation of the individual filing period later in the year.
Both the State of the Nation Address and the Budget Speech emphasized the importance of supporting and rebuilding the SMME sector. The President emphasized the importance of reducing the red tape in supporting SMMEs, and this initiative is led by the office of the Presidency. The Budget Speech announced changes to the Employment Tax Incentive and encouraged small businesses to use the Employment Tax Incentive and hire qualified individuals to help alleviate unemployment and boost the economy.
This edition is dedicated to employment-related tax obligations, key changes in the 2022 budget speech, key obligations of newly registered companies (including turnover tax), traders and travelers, upcoming key periods and education materials available to provide awareness of tax obligations to SMMEs. In the coming months, we will communicate webinar and workshop dates for SMMEs, Traders, and Travelers related topics via the SARS website and on social media platforms.
Annual Reconciliation Season 2022
This year, the Annual Reconciliation Declaration (EMP501) submission period opens on 1 April and closes on 31 May. Employers are required to submit their annual reconciliation declarations covering the full tax year from 1 March 2021 to 28 February 2022. The EMP501 must reflect accurate and up-to-date payroll information about your employees, employees’ tax (PAYE) payments made and tax certificates (IRP5/IT3(a)’s) generated.
Making it easy
To reconcile easily and conveniently, we have included useful information below:
- Employers, Tax Practitioners and Payroll Administrators need to download the latest Employers [email protected] version 7.2.3 which was released on 11 March 2022. This can be done via SARS eFiling.
- Employers must submit outstanding monthly declarations (EMP201) and make all payments due before submitting the EMP501 for 2022.
- Where employees are not registered for income tax purposes, employers must register them using Single (“Individual ITREG”) and bundle IT Registration (“Bundled ITREG”) for existing tax numbers as well as new registrations available on [email protected]™.
- First-time job seekers can register for income tax via eFiling or on the SARS MobiApp.
- Employers must check, verify details, and issue IRP5/IT3(a)’s to employees on time.
SARS Service Charter
- SARS will help by providing service, responses, instructions and access to information and systems.
- SARS will respect your constitutional right to privacy.
- Submit an accurate, fully paid declaration to SARS on time.
- Comply with all prescribed administrative processes and timeframes.
Accuracy and on-time filing is critical
It is very important for employers to file accurate and complete EMP501’s. We use the information we receive through your submission of an EMP501 to populate the tax returns of your employees and, if they are part of our auto-assessment population, to populate their assessments. Incomplete or inaccurate information will negatively affect your employees’ ability to meet their tax obligations. In practise, your incomplete or inaccurate information may result in significant delays of refunds to your employees where due.
Why is it important for you to submit an accurate EMP501 return on time?
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 1 percentage point up to 10% of the year’s PAYE liability. Furthermore, an employer who wilfully 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.
Employers with less than 50 employees can use either SARS eFiling or SARS [email protected]™. Employers with more than 50 employees must file the EMP501 using [email protected]™ Employer.
Enhancements to [email protected]™ Employer
- Updated letter template for new Tax Directives feedback report for retirement funds.
- Adjustment to the PAYE Dashboard to display information related to the selected period of reconciliation.
Status of Submission
Employers must always check the status of submissions to ensure that the EMP501 has been successfully filed at SARS.
Key Budget Speech Changes
1. Employment Tax Incentive (ETI)
As per 2022 Budget Speech, the Employment Tax Incentive (ETI) has been extended to 28 February 2029. The ETI is aimed at supporting the private sector in the employment of:
Young people from the age of 18 to 29 years who are in possession of a South African identity document (ID); and
- Employees of any age in special economic zones and in any industry identified by the Minister by notice in the Government Gazette.
SMMEs who employ the qualifying employees can claim ETI for qualifying employees for a maximum of 24 months, during the period in which the employee is employed. The total ETI that an employer qualifies for during a month will be off set against the employer’s monthly PAYE liability.
The qualifying employee must meet the following criteria:
- Be between the ages of 18 and 29, and employees of any age in Special Economic Zones (SEZs);
- Be in possession of a South African bar-coded ID;
- If not in possession of a valid ID, then an asylum seeker or a refugee in possession of the proper permits;
- Not be a connected person to the employer (for example they cannot be a relative of the employer);
- Not be a domestic worker;
- Be employed by the employer on, or after the 1 October 2013, and have commenced working on, or after that date;
- Not earn more than R6 500.
The ETI Calculation Formulae that are Effective from 1 March 2022:
First 12 Months
Second 12 Months
R0 to R1 999,99
75% of Monthly Remuneration
37,5% of Monthly Remuneration
R2 000 to R4 499,99
R4 500 to R6 499,99
R1 500 – (75% x (monthly remuneration – R4500))
R750 – (37.5% x (monthly remuneration – R4 500))
2. Corporate Income Tax (CIT)
Corporate Income Tax (CIT) is a tax imposed on companies who are residents in the Republic of South Africa i.e. incorporated under the laws of, or which are effectively managed in, the Republic, and which derive income from within or outside the Republic. Non-resident companies which operate through a branch, or which have a permanent establishment within the Republic are subject to tax on all income from a source within the Republic.
Corporate Income Tax is payable at a rate of
- 28% for companies with years of assessment ending on any date between 1 April 2022 and 30 March 2023.
- 27% for companies with years of assessment ending on or after 31 March 2023
As mentioned in the 2022 Budget Speech by the Minister of Finance:
Companies need to submit an Income Tax return (ITR14) annually, within 12 months after their year-end (e.g. if your year-end is 28 February 2022, your CIT return is due on 28 February 2023). In addition, an IRP6 every six months to ensure Compliance requirements are met, and payments made where necessary. To watch a video on how to submit your income tax returns for companies, click here.
Failure to submit a CIT return may result in imposition of a penalty.
When should Provisional Tax be paid?
- First payment – within six months from the beginning of the year of assessment
- Second payment – on, or before the last day of the year of assessment
- Third payment – seven months after the year of assessment for taxpayers with February year-end, and six months after year of assessment in all other cases.
Payment of tax upon an assessment notice issued by SARS must be done within the period specified in such notice.
Newly registered companies
SARS has developed a letter that aims to explain the tax obligations of SMMEs. Click here to read the letter. Newly registered companies are encouraged to register for eFiling and update their contact details to receive timeous communication from SARS. Below is some useful information for newly registered micro businesses:
1. Turnover Tax
Turnover tax (TT) is a single tax system which taxes turnover and not profit, this means that small businesses will pay tax on their turnover at a rate of between 0% to 3%. Turnover Tax is an optional and simplified tax, and serves as an alternative to income tax, provisional tax, and capital gains tax for micro businesses. Small businesses who qualify for turnover tax will pay tax when their turnover exceeds R335 000.
To qualify for turnover tax, small businesses must have a turnover of less than R1 million and meet certain criteria available on the turnover tax application form (TT01 form).
How to apply for turnover tax
Complete the TT01 form available via this link: Turnover-Tax Application Form
You can use the following channels to submit the Turnover Tax forms and returns:
- Make an appointment on our eBooking system, or call 0800 007 277 and choose option 0 to book an appointment.
- email SARS on [email protected]
Small businesses with a turnover of R1 million and less are encouraged to take advantage of this tax system designed to reduce the cost and burden of compliance for micro businesses.
Please watch the SMME Turnover Tax Incentive for Micro Businesses webinar for more information.
Tax Compliance Debt Management and Outstanding Returns
Small businesses are encouraged to submit all their tax returns and make payments on time to avoid penalties and legal processes that are stressful and costly.
SARS has issued specific letters to newly registered companies, reminding them of their obligations. These taxpayers are encouraged to consult with SARS by making an appointment or calling our contact centre on 0800 007 277 (choose option 6), to ensure their tax affairs are in order.
Small businesses with debt can apply for a debt arrangement via eFiling, or by sending a request via email to [email protected]
2. Company Deregistration Process
We have noticed a number of small businesses who have since ceased trading but have not notified SARS of this. Companies are required by law to deregister their companies as soon as they cease trading. When closing a business/company, this means it’s ceasing to operate either due to:
- Deregistration; or
Small businesses are required to deregister their company with the Companies and Intellectual Property Commission (CIPC) first. Once a business/company receives confirmation from the CIPC that they have been deregistered, the registered representative should visit their nearest SARS branch, and make sure the business or company is deregistered for all the various types of tax.
Traders and Travelers:
We urge our SMME Traders and Travellers to familiarise themselves with Customs requirements prior to arriving at the Ports. The Department of Agriculture, Fisheries and Forestry (DAFF) controls agricultural and animal products (even for home consumption), including live animals. In most instances, a permit is required, and such goods will be detained if a permit is not produced. SMME Traders and Travellers who will be carrying firearms while travelling are advised to contact the South African Police Service (SAPS) at the Ports they will be using. Travellers going abroad or coming into the country are only allowed to bring medicine that will last for 30 days if they are in possession of a doctor’s prescription. Valuable items such as laptops and cameras must be declared at Customs. There are also restrictions on the amount of cash that can be taken out, or brought into the country, including gold coins etc.
You may follow these links for more detailed information:
Small Business and Customs trader leaflet
Reflection on International Customs Day
International Customs Day was celebrated globally on 26 January 2022 under the theme “Scaling up Customs Digital Transformation by Embracing a Data Culture and Building a Data Ecosystem”. The World Customs Organisation (WCO) and member states used this opportunity to showcase their efforts and activities in this domain. The South African Revenue Services (SARS) hosted its annual celebration virtually, and in aligning with the global theme, presented the following topics
- The data transformation journey to enable instant access to information
- Customs automation in the quest to build compliance management
- The Customs modernization journey in terms of increasing customs data and building a data ecosystem
- Digital transformation from a trade perspective
- Sharing and utilizing data across the trade supply chain
- The optimization of technology towards improved facilitation of cross-border road transport operations and trade flow.
International SMME Day
On 27 June, the Global Community will be celebrating International SMME Day. The significance of this day is to raise public awareness of the SMME contributions to sustainable development and the global economy. The SMME, Traders and Travellers Division is looking forward to the 2022 SMME Day and will be sharing the messages delivered this year. In 2021, the theme was “Key to an inclusive and sustainable recovery”, and the call was for the International Community to explore how this segment can be equipped to ensure an equitable and sustainable post-Covid 19 recovery.
Available Tax Education materials
Please click on the links below for education materials useful to SMMEs
- Tax Compliance status (Tax Clearance)
- Essential tax guide to small businesses
- Turnover Tax for small businesses
- Customs Trader leaflet
- Excise duty leaflet
- Traders and Travelers leaflet