In South Africa, the tax year for individuals runs from 1 March to 28 February. Income tax returns for completion and submission by taxpayers are issued by the South African Revenue Service (SARS) approximately four months after year end (usually 1 July every year). This allows SARS sufficient time to enter all the data that must appear in the tax returns of individuals.

An important part of this preparation is related to the Employee Tax Reconciliation (EMP501 return) that employers must complete and submit to SARS.

Every employer must submit an Employer Declaration (EMP201 return), monthly, reflecting the employee tax (PAYE, UIF and SDL) deducted from employees’ salaries and payable to SARS. At the end of the tax year, the employer must issue a tax certificate [IRP5 or IT3(a)] to each employee, indicating what compensation was paid to the employee, which deductions were made (medical, pension and retirement annuities) and also which taxes were deducted (PAYE, UIF and SDL).

The EMP501 reconciliation is then used to compare the monthly EMP201s issued during the year with the IRP5/IT3(a) certificates to ensure that the correct amount of employee tax was paid to SARS during the year.

The EMP501 reconciliation for the tax year that ended on 28 February 2017 (the ‘2017 year’) must be submitted to SARS not later than 31 May 2017. If this reconciliation is not submitted in time, SARS may impose heavy fines on the employer, which is equal to 10% of the total employee tax liability for the tax year.

In the last few years, however, SARS has simplified the process significantly by releasing software called e@syFileTM, which facilitates the making out of IRP5 and IT3(a) certificates and also makes it possible to complete and submit the EMP501 reconciliation electronically.

If we handle your reconciliation, we will get in touch with you during the coming month to obtain the required information. Should you have any enquiries or need more information on this matter, or if you would like us to assist you with your salary reconciliations, you are welcome to contact Jaco van Straaten at jaco@asl.co.za or on 021 840 1600.