New PAYE tax process for SMEs

Johannesburg - Small- and medium-sized enterprises (SMEs) should brace themselves for the first biannual PAYE tax reconciliation process, which starts on Wednesday and closes at the end of October 2010.

"It is important that companies bear in mind that the biannual submission is completed for reconciliation purposes only. Payroll departments should not issue the tax certificates to their employees," said Grant Lloyd, managing director at payroll and HR software specialist Softline Pastel Payroll.

The South African Revenue Service (Sars) will also release a new version of its on-line e@syFile system on Wednesday. Lloyd added that companies must download and install the new e@syFile version as soon as possible.

They should then upload and submit on e@syFile their electronic IRP5/IT3(a) tax certificates, together with the EMP501 Reconciliation Declaration for the period March 1 2010 to August 31 2010.

"Hopefully, SME companies ensured that their preparations for these compulsory electronic submissions with full employee tax details received serious attention and that their houses are completely in order for this first ever biannual PAYE reconciliation," said Lloyd.

"They were warned by Sars (the South African Revenue Service) earlier this year. Those with automated payroll systems should be able to embrace this new process without major difficulty," said Lloyd.

SMEs will be able to finalise their biannual employee reconciliations up until 31 October. In effect, they have two months to complete this process. Employers with automated payroll software systems should find it a breeze, as they need only capture employees' information and their payslips.

During the reconciliation process, automated payroll software ensures the electronic tax certificates are generated automatically in the IRP5.11 CSV file. This file can be imported directly into SARS e@syFile.

The EMP501 Reconciliation Report to complete the PAYE, SDL and UIF reconciliation declaration on Sars' e@syFile can be generated for the period March 1 2010 to August 31 2010 directly from your payroll software. This saves businesses considerable time and cost, compared to manual calculation and capturing.

Lloyd said Sars will not reject tax certificates without individual income tax reference numbers so e@syFile will accept them. Information relating to these particular employees will, however, be sent to Sars to be validated and then registered for income tax, if they have not yet been registered.

Sars will return all outstanding individual income tax reference numbers to employers before February 2011 to ensure that final tax certificates have employees' income tax reference numbers. This process will be completed for all employees, regardless of their annual earnings.

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