SMME CONNECT #8 – May 2024 EDITION

In April 2024, the SARS Commissioner announced the revenue results of the past financial year, which were a net revenue of R1.741 trillion. This is a year-on-year growth of 3.2%, compared to a nominal gross domestic product growth of 4.9%. The small, medium and micro enterprise (SMME) segment contributed R466 billion (+10.8% year-on-year) to this amount. This is 28% of the total collection. A heartfelt gratitude to all our compliant SMMEs for making this possible.

The edition provides insights to assist small business owners in complying with the Employer Reconciliation (EMP501) obligations during the filing season. The 2024 employer filing season opened on 1 April 2024 and will close on 31 May 2024. SARS urges all employers to adhere to the deadline to avoid any penalties. Employer declaration reconciliation requires an employer to submit an accurate Employer Reconciliation Declaration (EMP501), Employee Tax Certificates [IRP5/IT3(a)s] to be issued and, if applicable, a Tax Certificate Cancellation Declaration (EMP601).

Accuracy and on-time filing is critical

Importantly, employers must file accurate and complete EMP501s. The information received through the EMP501 is used to populate the tax returns of employees and, if they are part of our auto-assessment population, to populate their assessments. Incomplete or inaccurate information will make it difficult for employees to meet their tax obligations. Worse, employers’ incomplete or inaccurate information will result in significant delays in refunding their employees, where due.

Note – Employers, Tax Practitioners and Payroll Administrators need to Download the latest e@syFile version via SARS eFiling website. Employers must submit outstanding monthly declarations (EMP201) and bi-annual reconciliations (EMP501) to SARS before they submit the 2024 EMP501 reconciliation. Employers must register employees for Income Tax purposes using Single (“Individual ITREG”) and bundle IT Registration (“Bundled ITREG”) for existing tax numbers as well.

Channels to submit EMP501

• Employers with less than 50 employees can either use SARS eFiling or SARS e@syFile™.
• Employers with more than 50 employees must use SARS e@syFile.

Penalties for non-compliance

An employer who files EMP501 reconciliation late will be penalised under the provisions of paragraph 14(6) of the Fourth Schedule to the Income Tax Act.

The penalty will equal 1% of the year’s PAYE, for each month that the return is late, up to 10% of the year’s PAYE.

Employment Tax Incentive (ETI)

The aim of the ETI is to encourage employers to hire young work seekers.

The ETI came into effect on 1 January 2014 and will end on 28 February 2029, and applies to qualifying employees who were employed on or after 1 October 2013 by eligible employers.

To qualify for ETI, an employer must:

• Be registered for PAYE;
• Not be disqualified by the Minister of Finance due to displacement of existing employees or other reasons; and
• Employ one or more eligible employees.

An eligible employee is someone who:

• Has a valid South African ID or asylum seeker permit;
• Is between the age of 18 and 29 (or any age if employed in a special economic zone or in an industry designated by the Minister of Finance);
• Is not a domestic worker or a connected person to the employer (such as a relative or shareholder);
• Is paid at least the minimum wage applicable to that employer or the sector, or R2 000 if there is no minimum wage; or
• Is paid less than R6 500 per month.

The ETI benefit is calculated based on a sliding scale that depends on the employee’s monthly remuneration. The table below shows the ETI amount per month for the first 24 months of employment which are effective from 1 March 2022.

Table 1: ETI Calculation Formula

Note: The ETI benefit can be claimed monthly by reducing the PAYE payable by the employer to SARS. If the ETI benefit exceeds the PAYE liability, the excess amount can be rolled over to the next month or refunded by SARS every six months. The ETI can be forfeited due to non-compliance.

Debt Management

SARS is legally obliged to remind all taxpayers with outstanding debt to pay on time to avoid interest and penalties. SARS urges taxpayers who face difficulties in paying their taxes to immediately write to [email protected]. SARS is open and receptive to exploring the options of relief or compromise. It remains a legal obligation for taxpayers to pay their tax liabilities on time and in full.

Alternatively, they can make payment arrangements to settle their debts. How to make payment arrangements?

SARS implemented the Enhanced Debt Management process to help taxpayers with outstanding debt to initiate a request for a payment arrangement via eFiling for four tax types:

• Personal Income Tax;
• Corporate Income Tax;
• Value-Added Tax; and
• PAYE

Administrative penalties can also be settled using this channel. This is a positive development that makes it easy for small, medium and micro enterprises (SMMEs) to comply with their tax obligations.

Businesses can now initiate a payment arrangement request for outstanding debt on eFiling from the following sources: Statement of Account (SOA); SOA admin penalties; Return Work-Page; Notice of Assessment; Notice of Assessment for Administrative Penalties; Final Demand Letter; and Final Demand Reminder Letter. The enhancements of the payment arrangement process on eFiling will enable taxpayers to:

• Initiate and simulate a payment arrangement, with an instalment plan of up to 36 months;
• Supply the reason for the request and preferred method of payment;
• Attach mandatory supporting documents, where required; and
• Submit the request if they meet the qualifying criteria.

SARS is committed to assisting taxpayers who are willing to comply, but also ready to enforce the tax laws against those who are not.

The following channels are available for making payments:

• eFiling;
• EFT payments; and
• Payments at a bank.