September 2015 PAYE Reconciliation Communication

Transcription

1 sars.gov.za September 2015 PAYE Reconciliation Communication 1. Clarification of source codes The following amendments to descriptions and explanations of source codes should be noted (amendments highlighted in GREY): 1.1. Normal Income Codes 3602 (3652) Income (Excl) Any non- taxable income, excluding foreign service remuneration for RSA residents that is exempt ito section 10(1)(o)(ii), non- taxable allowances and fringe benefits. For example, this code accommodates all payments of a capital nature. Examples include: Non- taxable pension paid on a regular basis (e.g. war pension, etc.), including amounts paid frequently (not lump sums) in terms of a Loss of Income policy with effect from 1 March 2015 (2016 year of assessment). Non- taxable income of a capital nature; etc. Non- taxable portion of an arbitration award, where applicable. Non- taxable portion (capital interest) received on an annuity purchased from a Fund; etc (3653) 3611 (3661) Pension Purchased annuity Code 3652 MUST be used for foreign service income, o excluding foreign service remuneration for residents that is exempt in terms of section 10(1)(o)(ii), o including pension/annuities paid from an RSA source in respect of services rendered outside the RSA to an RSA resident [section 10(1)(gC)] a non RSA resident [section 9(2)(i), the portion not taxable in RSA]. With effect from 2010 year of assessment, amounts previously included under codes 3604/3654, 3609/3659 and 3612/3662 must be included in this code (3602/3652). Any pension paid on a regular basis (whether from a pension or a provident fund) as well as backdated pension payment (for current tax year). Amounts paid on a regular basis in terms of a Loss of Income Policy up to 28 February 2015 (up to the 2015 year of assessment). Code 3653 MUST be used for Foreign Service income taxable in the RSA ito the relevant DTA (Double Taxation Agreement). The value of this code must be included in the value of code 3601/3651 for the 2010, 2011 and 2012 years of assessment. This includes taxable disability benefit. Valid for the 1999 to 2009 and from the 2013 years of assessment. The Foreign Service income codes (codes in brackets) are valid from the 2002 to 2009 and from the 2013 years of assessment. The taxable portion of interest received on an annuity purchased from an Annuity Fund. This also includes annuities purchased by provident funds (non- compulsory annuity for Income Tax purposes). Code 3661 MUST be used for foreign service income.

2 1.2. Allowance Codes 3713 Other allowances All other allowances, which do not comply with any of the descriptions listed under (3763) allowances, must be added together and reflected under this code on the certificate. Examples include: Entertainment allowance Tool allowance Computer allowance Telephone allowance Cell phone allowance Housing allowance Cash allowance Taxable Uniform allowance Taxable Relocation allowance, etc. Code 3763 MUST be used for Foreign Service income. With effect from 2010 year of assessment, amounts previously included under codes 3706/3756, 3710/3760, 3711/3761 and 3712/3762 must be included in this code (3713/3763) Fringe Benefit Codes 3809 (3859) 3815 (3865) Taxable Bursaries or scholarships Basic Education Non- taxable Bursaries or scholarships Basic Education (Excl) Taxable Bursaries and scholarships in respect of Basic Education [grade R to 12 and NQF level 1 to 4 (grade 9 to 12)]. Code 3859 MUST be used for Foreign Service income. The value of this code must be included in the value of code 3801/3851 with the 2010 years of assessment. Valid for the 1999 to 2009 and from the 2013 years of assessment. The Foreign Service income code (3859) is valid from the 2002 to 2009 and from the 2013 years of assessment. Non- taxable bursaries and scholarships in respect of Basic Education [grade R to 12 and NQF level 1 to 4(grade 9 to 12)] section 10(1)q Exempt portion. Code 3865 MUST be used for Foreign Service income. Valid from the 2013 year of assessment 1.4. Lump Sum Codes 3901 (3951) Gratuities / Severance Benefits Gratuities paid/payable by an employer prior to 1 March Severance benefits, as defined, paid/payable by an employer after 1 March 2011, if employee: o is 55 years or older; o became permanently incapable to be employed due to ill health, etc.; or o services terminated due to reduction of personnel or employer ceased trading. A Lump sum paid/payable in terms of par (d) of gross income which is not a severance benefit, MUST be reflected under code Code 3951 MUST be used for Foreign Service income.

3 3907 (3957) Other lump sums Other lump sum payments. Examples include: A Lump sum payment paid/payable by an employer due to normal termination of service (e.g. resignation or retirement), which is NOT a severance benefit, MUST be reflected under this code Antedate salary/pension extending over previous years of assessment Lump sum payments from unapproved funds Employer owned insurance policy (risk policy) proceeds NOT exempt ito the exclusion in section 10(1)(gG)(i) of the Income Tax Act i.e. premiums paid by employer NOT included as taxable benefit in employee income since the later of: o date on which employer become policy holder; or o 1 March Employer owed insurance policy (other than a risk policy) proceeds NOT exempt ito the exclusion in section 10(1)(gG)(ii) of the Income Tax Act i.e. premiums paid by employer NOT included as taxable benefit in employee income since commencement date of policy 3908 Surplus apportionments and Employer Owned Policy Proceeds (Excl) 3921 Living annuity and surplus apportionments (section 15C of the Pension Fund Act) Code 3957 MUST be used for foreign service income. Surplus apportionments on or after 1 January 2006 and paid in terms of section 15B of the Pension Funds Act of Employer owned insurance policy proceeds exempt ito section 10(1)(gG) of the Income Tax Act i.e. premiums paid by employer included as taxable benefit in income of employee since the date contemplated in section 10(1)(gG) see Explanation under code 3907 (3957)of employer owned policies Income Protection Insurance policy lump sums which are exempt ito section 10(1)(gI) of the Income Tax Act. Applicable from 1 March 2015 Lump sum payments accruing after 28 February 2009 from a Pension / Pension Preservation / Retirement Annuity / Provident / Provident Preservation Fund in respect of withdrawal due to: surpluses paid in terms of section 15C of the Pension Funds Act of 1956; withdrawal after retirement from a living annuity in terms of paragraph (c) of the definition of living annuity, where the value of the assets become less than the amount prescribed by the Minister in the Gazette, effective until 28 February For living annuity withdrawals on or after 01 March 2011 source code 3915 must be used. With effect from 2010 year of assessment, amounts previously included under codes 3902/3952 and 3904/3954 (where applicable) must be included in this code (3921) Deduction Codes Code Description 4005 Medical scheme fees (contributions) paid and deemed paid by employee Deemed paid by employee is the value of the taxable benefit (code 3810) included in the income of the employee. Premiums paid for loss of income policies. Not applicable from 2016 This code is not applicable from the 2016 year of assessment 4474 Employer s medical scheme fees (contributions) paid for the benefit of employees not included in code From 1 March 2012 the contributions paid by the employer on behalf of an employee who is 65 years and older and who has not retired, should also be reflected under this code.

4 4493 Employer s medical scheme fees (contributions) paid for the benefit of a retired/former employee who qualifies for the no value provisions in the 7th Schedule. This is the employer s portion of the medical scheme contribution made on behalf of an employee who is a pensioner (a person who by reason of superannuation, ill- health or other infirmity retired from the employ of such employer); the dependants of a pensioner after the death of the pensioner, (if such pensioner retired from the employ of such employer by reason of superannuation, ill- health or other infirmity); the dependants of a deceased employee after such employee s death, if such deceased employee was in the employ of the employer on the date of death; or an employee who is 65 years or older (not applicable from the 2013 year of assessment) Employees Tax Deduction, Employment Tax Incentives and Reason Codes Code Description 04 or 4 = Non- taxable earnings, including 4150 nil directives; and income protection annuities from 1 March 2015 (see notes under code 3602)

5 Legislative Changes for the 2017 Year of Assessment 1. Retirement Reform source codes In terms of the amendments to the Income Tax Act, contributions paid by an employer for the benefit of an employee to a pension fund, provident fund or retirement annuity fund is a taxable fringe benefit from 1 March The following new source codes and amendments to descriptions of will be implemented to facilitate the reporting requirements in this regard: 1.1. Fringe Benefit Codes 3817 (3867) 3818 (3868) 3819 (3869) 3825 (3875) 3826 (3876) Pension Fund DC component Pension Fund DB component Pension Fund DC & DB components Provident Fund DC component Provident Fund DB component Value of taxable benefit iro Employer s pension fund contributions paid for the benefit of employee, where benefits payable to member consists solely of a defined contribution (DC) component. Taxable value = employer contributions Code 3867 MUST be used for a taxable benefit iro of Employer Value of taxable benefit iro Employer s pension fund contributions paid for the benefit of employee, where benefits payable to member consists solely of a defined benefit (DB) component. Taxable value = amount calculated ito par 12D(3), Seventh Schedule formula: X = (A x B) - C. Code 3868 MUST be used for a taxable benefit iro of Employer Value of taxable benefit iro Employer s pension fund contributions paid for the benefit of employee, where benefits payable to member consists of a defined contribution (DC) and a defined benefit (DB) component. Taxable value = amount calculated ito par 12D(3), Seventh Schedule formula: X = (A x B) - C. Code 3869 MUST be used for a taxable benefit iro of Employer Value of taxable benefit iro Employer s provident fund contributions paid for the benefit of employee, where benefits payable to member consists solely of defined contributions (DC) component. Taxable value = employer contributions. Code 3875 MUST be used for a taxable benefit iro of Employer Value of taxable benefit iro Employer s provident fund contributions paid for the benefit of employee, where benefits payable to members consists solely of a defined benefit (DB) component. Taxable value = amount calculated ito par 12D(3), Seventh Schedule formula: X = (A x B) - C. Code 3876 MUST be used for a taxable benefit iro of Employer

6 3827 (3877) 3828 (3878) Provident Fund DC & DB components Retirement annuity Fund Value of taxable benefit iro Employer s provident fund contributions paid for the benefit of employee, where benefits payable to member consists of a defined contribution (DC) and a defined benefit (DB) component. Taxable value = amount calculated ito par 12D(3), Seventh Schedule formula: X = (A x B) - C. Code 3877 MUST be used for a taxable benefit iro of Employer Value of taxable benefit iro Employer s retirement annuity fund contributions paid in respect of employee. Taxable value = employer contributions. Code 3878 MUST be used for a taxable benefit iro of Employer 1.2. Deduction Codes Code Description 4001 Total pension fund contributions paid or deemed paid by employee Deemed paid by employee is the value of the taxable benefit (code 3817, 3818, 3819) included in the income of the employee. Prior to the 2017 year of assessment, this code is applicable to Current pension fund contributions paid by employee. Arrear pension fund contributions paid by employee. Not applicable from 2017 This code is not applicable from the 2017 year of assessment Total provident fund contributions paid or deemed paid by employee. Deemed paid by employee is the value of the taxable benefit (code 3825, 3826, 3827) included in the income of the employee. Prior to the 2017 year of assessment, this code is applicable to Current provident fund contributions paid by employee Total retirement annuity fund contributions paid or deemed paid by employee Not applicable from Not applicable from 2010 to Deemed paid by employee is the value of the fringe benefit (code 3828) included in the income of the employee. Prior to the 2017 year of assessment, this code is applicable to Current pension fund contributions paid by employee. Arrear (re- instated) retirement annuity fund contributions. This code is not applicable from the 2017 year of assessment. Employer s pension fund contributions paid for the benefit of employee. This code is not applicable with effect from the 2010 to 2016 years of assessment and must not be included in any other code. Valid to 2009 and from 2017 years of assessment. Employer s provident fund contributions paid for the benefit of employee. Not applicable from 2010 to 2016 This code is not applicable with effect from the 2010 to 2016 years of assessment and must not be included in any other code. Valid to 2009 and from 2017 years of assessment Employer s retirement annuity fund contributions paid for the benefit of employee. This code is valid from the 2017 year of assessment.

7 2. Proposed Additional Medical Expenses Tax credit source code - Please note this is dependent on the promulgation of the proposed legislation Currently, the additional medical expenses tax credit in respect of fees (contributions) exceeding three times the medical scheme fees tax credit for persons 65 and older are not taken into account for the monthly PAYE calculation. The additional medical expenses tax credit related to medical scheme fees for persons 65 and older has to be taken into account to reduce monthly PAYE with effect from 1 March Code Description 4120 Additional Medical Expenses Tax Credit if employee 65 allowed by Employer for PAYE purposes South African Revenue Service