In South Africa, the Employer Reconciliation process is carried out to reconcile the taxes collected from payrolled employees with the taxes paid to the South African Revenue Service (SARS), and the total tax value of employee tax certificates.
In 2021, the submission window for Employer Interim Reconciliation Declarations (EMP501) opened on 13 September and will close on 31 October. The process requires employers to reconcile the payroll tax liabilities (relating to PAYE, SDL, and UIF) that have been declared on monthly Employer Declarations (EMP201) for the first 6 months of the reconciliation year. In 2021, that means declarations from 1 March to 31 August.
EMP201 reconciliation is necessary to generate interim IRP5/IT3(a) certificates which contain the payroll tax information that is used to complete EMP501.
How to Submit EMP501
Employers in South Africa may submit EMP501 electronically, via the SARS eFiling and e@syFile™ Employer platforms. SARS has released the following guidance for employers that submit their forms using the platforms:
- The latest version of e@syFile™ Employer was launched on 13 September 2021. In order to register employees on e@syFile™ Employer for income tax purposes, employers should use Single (“Individual ITREG”) or bundled IT Registration (“Bundled ITREG”) for employees with existing tax numbers as well as for new registrations.
- Employers should submit outstanding EMP201 forms and outstanding EMP501 forms prior to submitting their Interim EMP501 for 2021.
Employers with more than 50 employees must use e@syFile™ Employer to make their EMP201 and EMP501 submissions. Employers with up to 50 employees may use SARS eFiling or e@syFile™ Employer.
e@syFile™ Employer Submission Changes in 2021
The e@syFile™ Employer platform has been updated to better facilitate EMP501 and EMP201 submission. The changes include:
- Align Validation with changes in external SARS PAYE BRS
- Validation Web Service upgrades
- Changes to the import file and manual capture screen to allow up to 5 Tax Directives with the additional fields required as of the 2022 Tax Year
- e@syFile™ Employer import and pre-submission-validation upgrades
- Enhancements to the EMP501 process:
- Facility to send deregistration requests with future-dated EMP501 submissions
- Enhancements to prevent incorrect ETI submissions and to allow for the reinstatement of ETI
- Updated HTML5 forms for EMP201 and EMP501
- ETV feedback enhancements
- Enhancements to the Reassign Certificate function
Changes to Unemployment Insurance Fund Contributions
On 1 June 2021, the earnings threshold for calculating employee Unemployment Insurance Fund (UIF) contributions was set at R17,712 per month - up from R14,872. The annual threshold is set at R212,544.
Monthly contributions for employees who earn over those amounts should be calculated using the ceiling amount. In practice, this means that employees earning over R17,712 per month will pay R177.12 (1% of their pre-threshold earnings) in UIF contributions. Since employers must make an equal contribution, the total UIF contribution will be R354.24.
Details of the changes to UIF contributions are set out in South Africa’s Government Gazette and on the UIF website.
Changes to Emergency Tax Relief
The following changes have been made to South Africa’s Emergency Tax Relief measures in 2021:
- Employment Tax Incentive (ETI): An additional ETI has been introduced for private sector employers with employees that earn less than R6,500. The ETI is worth R750 and is applicable from August to November 2021. The ETI mirrors the 2020 ETI (which ran from April to July 2020) - although amounts cannot be claimed or carried over from August 2021 to September 2021.
- ETI refunds: Any applicable ETI refunds will be paid monthly from August to November 2021.
- PAYE liabilities: Businesses with a gross income of up to R100 million are permitted to delay 35% of their PAYE liabilities from August to October 2021 without incurring penalties or interest. The deferred amounts are payable in 4 equal monthly installments from 7 December 2021 to 7 March 2022.
- Alcohol sector: Businesses in the alcohol sector may apply for deferrals on their excise duty payments for up to 3 months.
Businesses must be tax compliant to qualify for Emergency Tax Relief.
To ensure tax compliance, employees should ensure that they capture and calculate PAYE liability on monthly EMP201 returns and on EMP501 reconciliation accurately - or risk penalties and interest. Employer Reconciliation is an important part of the tax reporting process: any errors made during the process may have far-reaching consequences, and prevent employees from meeting their tax obligations.
Upon submission, employers may check the status of their EMP501 form on the SARS e-Filing system.
Non-compliance penalties: Employers in South Africa that fail to submit reconciliation forms correctly risk financial and criminal consequences. Under South African law, employers that wilfully or negligently fail to submit EMP201 or EMP501 may be found guilty of a criminal offence and be liable for up to two years’ imprisonment, or imprisonment and a fine.
If you are interested in doing business in South Africa, find out everything you need to know about payroll, tax, social security, employee benefits, work permits, employment law and more in activpayroll’s Guide to Doing Business in South Africa. This is available as a free PDF to download.