ACCOUNTING □ TAXATION □ BUSINESS CONSULTING

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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.

Reasons and application forms for tax directives

• 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).

• Employees' tax to be deducted at a fixed percentage (e.g. commission agents / personal service company / personal service trust).

• Employees' tax to be deducted at a fixed amount (e.g. Paragraph 11 of the 4th Schedule (hardship) / assessed loss carried forward).

• 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

• Lump sums paid by pension and / or provident fund. (e.g. death / ill health / retirement / provident fund – deemed retirement / unclaimed benefit).

• 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).

• 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).