I want to get a tax directive

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  • 10 October 2022 – Update on Tax Directives enhancements in line with Financial Sector Conduct Authority (FSCA) were implemented

    The South African Revenue Service (SARS) implemented enhancements to the Tax Directives process on 16 September 2022 by validating the name of the fund at Financial Sector Conduct Authority (FSCA) as well as the number with the FSCA database.

    Where Funds and Fund Administrators experience spelling errors between information on the FSCA website that is not aligned with your FSCA registration letter, a request to correct the spelling error must be sent to the following contact person: Jodine Scholts at [email protected] at the FSCA. Please note that this email address is only for the correction of spelling errors of names.

    All other issues relating to the FSCA, must be directly addressed with the FSCA via the existing channels available to the Funds and Fund Administrators.

    You are advised to continue using the name exactly as it is listed on the FSCA website until the changes on the name have been effected to avoid a rejection of the directive application.

  • 16 September 2022 – Tax Directives enhancements in line with Financial Sector Conduct Authority (FSCA) were implemented

    SARS has successfully implemented enhancements to the Tax Directives validation process.

    Please note that going forward, SARS will be validating the registration data and status of entities submitting Tax Directive applications with the Financial Sector Conduct Authority (FSCA). Due to the additional control measures, some applications will inevitably be declined due to failed validations if the data that is captured is not aligned with the information on the FSCA website.

    Fund Administrators and Long-term Insurers are encouraged to ensure that the registration data (Name of the fund, name of participating employer, name of Long-term Insurer and the registered number) captured on the tax directive application is correct and corresponds with the registration data on the FSCA records.

    In the unfortunate event that the tax directive application is declined due to incorrect data captured, kindly ensure that the registration data with the FSCA is used and resubmit tax directive application.

    The following Guides were updated:

  • 12 September 2022 – Tax Directive Software Implementation

    The South African Revenue Service (SARS) will introduce enhancements to the Tax Directives process as indicated in the communication published on 20 July 2022.  The planned implementation date is scheduled for 16 September 2022, you will be notified should this date change.

  • 16 August 2022 – Tax Directive Enhancements for September 2022
    Following previous communication, that the South African Revenue Services will be validating the registration data and status of entities submitting Tax Directive applications with the information captured on the Financial Sector Conduct Authority (FSCA) database, please note that some applications will inevitably be declined because of validations failing where the data is not aligned to the data on FSCA records.  For more information click here.


  • 25 July 2022 – Emigration withdrawal changes

The tax directive system currently includes a validation that results in tax directive applications, with the ‘Emigration withdrawal’ reason where the date of accrual is on or after 1 March 2022, being rejected.  The tax directive validation has been subsequently removed. This means that the accrual date for tax directive applications with the reason ‘Emigration withdrawal’ can be a date after 1 March 2022 but the following supporting documents must be attached to the tax directive application submitted through eFiling to prevent the tax directive being rejected:

    • The emigration application (MP336(b)) with a date stamp before 1 March 2021; and
    • The letter issued by the Authorised dealer must indicate that the emigration is recognised for purposes of exchange control before 1 March 2022 (SARB Approval date).

The Tax Directive Guides have been updated with the information:

SARS will be enhancing the Tax Directive Process. This enhancement entails the validation of specific data captured on the tax directive application form against the information held by the Financial Sector Conduct Authority (FSCA).

The changes will only impact the back-end processes of SARS; there will be no changes made to the IBIR-006 Tax Directives Interface Specification.
The following data will be validated against the Funds’ information as registered with the FSCA:

• the registered fund name;
• participating employer name; and
• FSCA registration numbers (participating employer number included) should be captured as it is on the FSCA data base.

Data captured on the tax directive application must correspond with the registration data with the FSCA. Incorrect data or omitted data will result in the tax directive applications being declined.  

    • A new reason has been added on the IRP3a to cater for foreign companies that are not registered for Pay As You Earn to make severance payments to South African tax residents who have performed work within the Republic for the said company. When the employer pays the employee, the tax practitioner or SARS will select reason <Severance benefit – Paid by a non-resident Employer>
      • When the taxpayer/Tax Practitioner completes the return, a new field will be added on the ITR12 to cater for payments made by foreign entities. The taxpayer/Tax practitioner must select <Y>
      • This will open a container whereby <new source code 3925) will be generated to capture the amount of the severance benefit received and the Tax Directive number which would have been issued for this purpose.

         

  • 25 April 2022 – Legislative changes to the Tax Directives process have been implemented.

    The following information is important for Fund Administrators, Insurers, Tax Practitioners, Advisors and taxpayers.

    • Taxpayers who are members of a pension preservation or provident preservation fund, who have reached retirement age and are 55 years and older are now allowed to transfer the retirement benefit to another preservation fund or a retirement annuity fund tax neutral on a Form A&D – reason Transfer before Retirement [par 2(1)(c)]
        • Taxpayers can now, on retirement, elect to use two thirds (⅔) or more of the total value of the retirement interest in the fund to provide a pension and / or annuity or purchase a living annuity and / or a guaranteed annuity from an Insurer. Alternatively, they can elect to keep a portion of the retirement interest in the fund which will provide a pension and / or annuity and use a portion to purchase a living annuity and / or a guaranteed annuity from an Insurer. However, it is important to note that the condition placed on a purchase of an annuity is that the value of each annuity (living and / or guaranteed and / or remaining in the fund) must be R165 000 and above, respectively. 
  • 18 January 2022 – Tax Deductions (PAYE) on your Pension or Annuity

    To assist pensioners with more than one source of income, recently introduced legislation makes provision for SARS to determine a more accurate PAYE deduction amount. We do this by using the latest data available to SARS.  Your retirement fund administrator will then deduct a more accurate amount of PAYE from your pensions or annuities. It is our intention to introduce this service with effect from 1 March 2022. Your retirement fund administrator is already aware of all the above. For more detail, click here.

  • 6 December 2021 – Tax Directive Enhancements

    Enhancements were implemented to the Tax Directives system in line with the IBIR-006 -Tax Directive Interface Specification:  

    In cases where a pensioner has one source of income during a tax year, our PAYE system typically ensures that the tax due at year-end is sufficiently covered by way of monthly PAYE withholdings. However, where a pensioner is in receipt of more than one source of income, a tax debt may arise at year-end when we combine all the sources of income together for purposes of determining taxable income and tax due.

    While the PAYE system permits a pensioner to request that a higher amount of PAYE be deducted so that any tax due at year-end is adequately covered, not many pensioners are making use of this option, which then leaves them with a tax debt at year-end, which they did not budget for. In turn, this has a significant negative impact on the outstanding debt book of SARS.

    In response to this, recently introduced legislation makes provision for SARS to determine the effective rate of tax in respect of the combined employment and/or pension sources of income of a taxpayer, with reference to the latest data available to SARS, and to provide that rate to the retirement fund administrators for purposes of withholding PAYE.

    It is the intention to introduce this service with effect from 1 March 2022.

    In practice, this will mean the following:

    1. Prior to 1 March 2022, SARS will, where it deems necessary, provide retirement fund administrators with the PAYE withholding percentage for each of the pensioners on its payroll that qualify;

    2. This means that retirement fund administrators will be required to use the rate provided by SARS in respect of remuneration paid or payable with effect from 1 March 2022;

    3. SARS will provide the PAYE withholding rates by way of an electronic file in CSV format. This file will be issued via [email protected]™;

    4. Where a PAYE withholding rate has not been provided by SARS in respect of a particular pensioner, retirement fund administrators must continue to apply the normal PAYE withholding rates;

    5. Where SARS provides a PAYE withholding rate, it will be by way of an annual directive. Where a pensioner’s circumstances change during the year (for example other employment income ceases, or death and so on), the retirement fund administrator may apply the normal PAYE withholding rate as opposed to the withholding rate provide by SARS with effect from the month in which the it becomes aware of the change of circumstances;
    6. Notwithstanding the PAYE withholding rate provided by SARS, a pensioner may at any time, request his or her retirement fund administrator to withhold PAYE at a rate higher than the rate provided by SARS. The Voluntary over deduction indicator in the code 3195 field on the IRP5/IT3(a) certificate must be set to “Y” for yes, if applicable, as per the normal procedure; otherwise it must be “N” for no – this field is mandatory from the 2020 year of assessment. However, all PAYE amounts withheld and paid over to SARS must be declared under code 4102 on the IRP5/IT3(a), including any voluntary over-deducted amounts.

    7. Notwithstanding the PAYE withholding rate provided by SARS, a pensioner may request his or her retirement fund administrator to withhold PAYE at a rate that is equal to the PAYE withholding rate under the normal PAYE withholding tables. In such a case, the retirement fund administrator is required to inform the pensioner of the possibility that the PAYE withholding rate will be insufficient to cover the tax liability of the taxpayer on assessment;

    8. The rates of PAYE withholding provided by SARS apply in respect of the following source codes only:
      a. 3603 – Pension
      b. 3610 – Annuity from a Retirement Annuity Fund
      c. 3611 – Purchased Annuity
      d. 3618 – Annuity from a Provident Fund or a Provident Preservation Fund.

What is the purpose of a tax directive for lump sums?

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 lump sums to a taxpayer or member. 

ONLY Employers, Fund Administrators and Insurers can request a tax directive from SARS via the following channels:

  • eFiling – Employers and Fund Administrators who have an organisation profile can log in and request a directive online.
  • Register as an Interface agent. (Refer to the Tax Directive Interface specification)
  • In exceptional cases use the email address. Please state the reason why the lump sum tax directive cannot be submitted through the above channels and supporting documents may be submitted here after receiving a case number after sending the email. 

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 in accordance with the date of accrual.

Application forms are available for specific tax directive types. FORM A&D, 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.

What is the purpose of a hardship directive?

A taxpayer can submit a directive application requesting SARS to consider alleviating hardship due to circumstances outside the control of the taxpayer. The taxpayer must assure SARS that the situation is outside his / her control and has caused financial hardship.  Cases will be reviewed on an individual basis to determine whether the taxpayer qualifies for a hardship directive under these circumstances. The taxpayer or the taxpayer’s tax practitioner can complete the IRP3(b) or the IRP3(c) application form and submit the application form through SARS eFiling only.

The Freelance Artist hardship directive, IRP3(pa) has been withdrawn. Freelance artists are to use the IRP3(b) directive application form on eFiling for future applications.
 
Note: The application form on eFiling does not allow you to choose a percentage as before. This process is completely automated, and the system calculates the percentage based on the income and expenses declared by the applicant.
 

Once the tax directive application for the IRP3(b) and IRP3(c) application is finalised (approved) by SARS, the tax directive (IRP3eb) will be available on eFiling. The tax directive will only be valid from the month following the date of issue of the tax directive until the end of the applicable tax year for which the application was submitted. For example, an application form is completed and submitted on 25 June 2020. The application is approved and a tax directive is issued by SARS on 10 July 2020. The directive will be applicable for the period 1 August to the end of February 2021 and that is also what will be reflected on the issued tax directive.

Here is a complete list of applications forms available:

Submit via eFiling only:

  • IRP 3(b) – Employees’ tax to be deducted at a fixed percentage (e.g. commission agents / personal service company / personal service trust / freelance artist). Can only be submitted via eFiling by an individual or tax practitioner
  • 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). Can only be submitted via eFiling by an individual or tax practitioner.
  • IPR3(f) – Doubtful Debts 11(j)(1)(2). Can only be submitted via eFiling.
  • IRP3(q) – Foreign Tax Credit under paragraph 10 of the 4th Schedule to the Income Tax Act. Can only be submitted via eFiling.

Submit via eFiling or Independent Software Interface:

  • IRP3(a) – Gratuities paid by employer (e.g. death / retirement / retirement due to ill health / severance benefits / other – to supply reason for payment).
  • IRP 3(d) – Decommissioned.
  • IRP3(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 / 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 / Transfer of an annuity to another insurer / Par (eA) Living Annuity Commutation – Termination of a Trust).
  • 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 can submit the application forms electronically via an interface agent or register on SARS eFiling.  Only in exceptional cases where the tax directive application form cannot be processed successfully through any of the electronic platforms can the hard copy tax directive application form be emailed to only one of the email addresses on the SARS website. IRP3(b) and IRP3(c) hard copy applications will no longer be submitted through email.

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.

IRP 3(c) is submitted to SARS to consider alleviating hardship due to circumstance outside the control of the taxpayer, the taxpayer must provide reasons and where possible attached supporting documents assure SARS that the situation is outside his / her control and has caused financial hardship. Cases will be reviewed on an individual basis to determine whether the taxpayer qualifies for a hardship tax directive under these circumstances.

Refer to the IT-AE-41-G01 – Completion Guide for IRP3a and IRP3s Form – External Guide 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. 

To see info for Independent Software Vendors (ISV’s) or Interface agents, click here.

Related Documents

FORM-AD – Request for Tax Deduction Directive Pension and Provident Funds – External Form

FORM-B – Request for Tax Deduction Directive Pension and Provident Funds – External Form

FORM-C – Request for Tax Deduction Directive Retirement Annuity Funds – External Form

FORM-E – Tax Deduction Directive After Retirement and Death Annuity Commutations – External Form

IRP3(a) – Application for Tax Directive Gratuities – External Form

IRP3(c) – Application for Tax Directive Fixed Amount – External Form

IRP3(q) – Variation of Employees Tax – External Form

IRP3(s) – Application for Tax Directive Share Option – External Form

IT-AE-33-G01-Tax-Directive-for-Emigration-Cease-to-be-resident-and-Expiry-of-visas-External-Guide

IT-AE-41-G01 – Completion Guide for IRP3a and IRP3s Form – External Guide

IT-AE-41-G02 – Guide to Complete the Tax Directive Application Forms – External Guide

IT-AE-41-G03 – Guide to Complete Submit and Cancel a Recognition of Transfer – External Guide

IT-AE-41-G04 – Guide to the Tax Directive functionality on eFiling – External Guide

IT-AE-45-G01 – Guide to the Tax Directive functionality on SARS MobiApp – External Guide

IT-PP-02-G01 – Amounts to be withheld when non resident sells immovable property in SA – External Guide

NR03 – Tax Directive Application by Non Resident Seller of Immovable Property in SA – External Form

ROT01 – Recognition of Transfer Between Approved Funds – External Form

ROT02 – Recognition of GN18 Purchase of Member or Beneficiary Owned Pension or Annuity – External Form

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