Clarity about the Paye tax rebate

A Fin24 wants to know when the Paye tax rebate is allowed for. He writes:

I want to know when the Paye tax rebate is usually allowed for.

Does one wait till the end of the year to claim the rebate from the South African Revenue Service (Sars)? Or does it usually come off from your monthly Paye payments?

Pieter Faber, technical executive: tax law & policy at the South African Institute of Tax Professionals (Sait), responds:

The short is answer is in effect both. Paye is in nature merely a prepayment towards your normal tax liability and not a separate tax.

Therefore, in general, the determination of the employees’ tax amount in terms of paragraph 9(1) of the fourth schedule to the Income Tax Act is based on the normal income tax calculation per section 5(2)and also includes the rebate in section 6.

However, even though the tax schedule calculation is the same, the amount to which it is applied may differ between employees’ tax and normal tax as for the former certain amounts may be excluded and in fact the employees’ tax payable may have to be ascertained from Sars on a different basis for specific amounts.

For example, for employees’ tax only 80% of the travel allowance is included to which the employees’ tax determination is applied whereas on assessment for the normal tax liability between 100% to 0% of this amount may be included depending on the facts.

However, the section 6 rebate will still on the normal tax calculation, based on the taxable income as determined on assessment, be deducted from the calculated tax amount as per section 5(2).
 
The result of this is that if you just receive a cash salary amount and have no deductions, your PAYE as calculated during the year should equate to your normal tax liability calculated on assessment. 

- Fin24

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