Slides relating to employee taxation.

1. TAXATION 2021
presented by Masibulele Phesa CA(SA), RA
Employee cost
Prescribed textbook: Notes on South African Income Tax

2. LEARNING OUTCOME
• Demonstrate knowledge of the terms of
“employer”, “employee”, “remuneration”, “annual
equivalent”, “annual payment” and “standard
employment” by calculating the employees’ tax
liability of a taxpayer in a case study

3. QUESTION
• What is your understanding of employees
tax?
• How often is it calculated?
• Who calculates it?

4. Introduction
Calculated separately for each employee
Paid on a monthly basis (but calculated annually and then converted into a
monthly amount, because the tax tables are based on annual amounts)

5. Remuneration
• Salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension,
superannuation allowance, retiring allowance or stipend (salary of a minister)
• Whether in cash or otherwise, and
• Whether or not for services rendered

6. Remuneration
• Fringe benefits
• Directors’ fees
• Right to acquire shares
• Annuities and royalties

7. Employees tax
Withheld monthly be each employer and paid over to SARS on behalf of the employee
• Prepayment of normal tax
• Only levied on remuneration

8. Balance of remuneration
• Remuneration less allowable deductions
• Employees’ tax on annual bonuses maybe calculated separately
• Travel allowances – only include 80% of the allowance, or if the vehicle is used for
more than 80% of business travel (based on kilometres travelled) then only include
20% of travel allowance in the employees’ tax calculation

9. How to calculate Employees tax

10. Steps to calculate employees’
tax
1. Determine what is included in remuneration and deduct allowable deductions
2. Determine an annual salary (bonus might be calculated separately – read the required)
3. Calculate the tax and use the primary rebate and section 6A medical credit (if employee belongs
to a medical scheme)
4. Divide by 12 to obtain a monthly employee tax

11. Employee tax example
• Thando (aged 45 and unmarried) receives a monthly salary of R20 000 and
a bonus of
R20 000 each year in February.
• Thando monthly contributes R1 500 to a pension fund based on his cash
salary.
• Thando receives a monthly taxable fringe benefit of R3 000 from 1 August
2020. He is not a member of a medical aid scheme.
• Thando contributes R500 a month to a RAF and supplied his employer with
proof of it.
• Calculate his employees tax 2021.

12. Solution
Months March to July 2020
Salary 20 000
Less contributions to retirement funds
Actual contributions: R2 000 (2 000)
Ltd to R350 000/12 = R29 167
27.5% of R20 000 = R5 500
Balance of Remuneration 18 000
Annual equivalent 216 000
Normal Tax (R33 840 + R7 280) 41 120
Less Primary Rebate (R15 714)
Employees tax for the year 25 406
Employees tax for one month 2 117
Employees tax for 5 months 10 586

13. Solution
Months August to January 2021
Salary 20 000
Fringe benefit 3 000
Less contributions to retirement funds (2 000)
Actual contributions: R2 000
Ltd to R350 000/12 = R29 167
27.5% of R20 000 = R5 500
Balance of Remuneration 21 000
Annual equivalent (18 000x5)+(21000x7) 237 000
Normal Tax 46 580
Less Primary Rebate (R15 714)
Employees tax for the year 30 866
Employees tax for one month 2 572
Employees tax for 6 months 15 433

14. SOLUTION
February 2021 (including bonus)
Balance of remuneration (R18
000x5)+R21000 x 7)
237 000
Bonus 20 000
Balance of Remuneration 257 000
Normal Tax 51 780
Less Primary Rebate (15 433)
Normal tax including bonus 36 347
Tax on bonus (36 347-30 866) 5 481
Employees tax for February
Tax excluding bonus 2757
Tax on bonus 5200
Total employees tax for February 7 957

15. Solution
Summary of tax for the year:
March – July 2020 10 586
August – January 2021 15 433
February 2021 5 481
Total employees tax 31 500

16. Duties of the employer
• Registration (paragraph 15)
• Obligation to deduct and pay over tax (paragraphs 2, 5, 6 and 7)
• Irregular remuneration (paragraph 9(3)
• Directives to the employer (paragraph 11)
• Records (paragraph 14(1)

17. Duties of the employer (continued)
• Commissioner: Power to call for information (paragraph 32(a))
• Annual returns (paragraph 14(3) and (6))
• Employees’ tax certificates (paragraph 13)

18. The employment tax incentive
• Introduced to hire young and less
experienced work seekers in order to
reduce unemployment in South Africa

19. QUESITION TIME
“Death, taxes and childbirth! There's never any convenient
time for any of them” Margaret Mitchell,