What happens if your tax isn’t paid over to Sars?

Employees should ensure that they receive their tax certificates (IRP5) from their employers in time for the annual filing season as it reflects how much tax they have already paid.

The South African Revenue Service (Sars) said the deadline for pay-as-you-earn (PAYE) remuneration reconciliations for the year to February 2018 closed at the end of May.

Employers who have not submitted their reconciliations are late and should submit them without any further delay as they may be liable for penalties.

Mark Sevitz, founder of digital tax assistant TaxTim, says the penalty for late payment is 10% of the amount owing.

In addition, the combined amount is subject to interest and is levied each month that the payment is late. “This is very serious, and unfortunately happens a lot,” says Sevitz.

Taxpayers may find themselves having to prove to Sars that they have indeed paid their taxes, and that any delay in Sars receiving the payment is not through any fault of their own.

Jaco la Grange, associate director at Deloitte, says employers are also required to submit the IRP5s of their employees to Sars. The information is used to pre-populate taxpayer returns.

Failure to withhold or pay the tax over to Sars is a criminal offence, says La Grange. However, there have been instances where, especially small to medium size companies, have used the PAYE to fill their own cash flow gaps.

Money that was either not paid, or never withheld from the employee, is still owed to the fiscus. “It is money owed to the state by the employer,” says La Grange. “The fact it is essentially paid by the employees does not take away the obligation of the employer to withhold it and to pay it to Sars.”

In cases where a company has not issued tax certificates, or worse, has gone belly-up, the individual employee must prove the monthly tax amount has been withheld.

Keith Engel, CEO of the South African Institute of Tax Professionals (Sait), says the law seeks to hold both the employer and employee liable for any tax shortfall. “If an employer takes the employee tax money and never pays the amount over to Sars, the employee is technically liable.”

Sars effectively waives the liability if the employee can demonstrate that the amount of tax was indeed taken on the assumption the money would go to Sars.

“Sars provides this relief out of fairness to the taxpayer,” says Engel. “This waiver, however, should actually be written into the law.”

There are several documents that can serve as proof that PAYE has indeed been deducted. This includes employment contracts and payslips.

If an employee suspects their company is not making the PAYE payment, then they can report this to Sars for investigation. An employee who cannot prove that the PAYE has been deducted will unfortunately be liable, and will have to pay the outstanding amount over to Sars.