Category: SARS | Fixed Percentage Directive TAX DIRECTIVES commission earners freelance artists tax payments Fixed Amount Directive
UNDERSTANDING TAX DIRECTIVES: WHAT YOU NEED TO KNOW
A tax directive is an instruction issued by the South African Revenue Service (SARS) to an employer, fund administrator, or insurer, specifying how tax should be deducted from certain payments made to taxpayers. For commission earners and freelance artists, understanding tax directives is essential for accurate and compliant tax payments.
TYPES OF TAX DIRECTIVES
SARS offers different types of tax directives, each designed for specific scenarios:
- Fixed Percentage Directive: A set tax rate (minimum 18%) is applied to all earnings. This helps commission earners and freelance workers manage their tax obligations without fluctuating monthly deductions.
- Fixed Amount Directive: A fixed tax amount is deducted, regardless of the monthly income.
WHO CAN APPLY FOR A TAX DIRECTIVE?
Only employers and tax practitioners can request a tax directive on behalf of employees. This is done through SARS eFiling.
For individuals, the following information is required:
- Employer details, including PAYE number
- Employment start date
- Detailed list of expenses
- Income forecast for the applicable tax period
PURPOSE AND BENEFITS OF A TAX DIRECTIVE
The purpose and benefit of tax directives is to allow the taxpayer to determine their taxable income (gross earnings less allowable expenses) and only pay tax during the year on that amount, as opposed to being taxed on their gross earnings.
Employers must adhere strictly to the directive’s instructions. Deviations are not permitted. Additionally:
- Tax directives are valid only for the specified tax year or period.
- Photocopies of directives may not be accepted by employers.
- Electronic confirmations from SARS via eFiling are considered valid.
APPLICATION PROCESS
Applications for tax directives are submitted online via SARS eFiling. It’s important to note that applications will be declined if the applicant is not SARS compliant. Therefore, ensuring up-to-date tax returns and payments is imperative.
DID YOU KNOW?
Hardship tax directives (IRP 3(c)) can be requested for taxpayers facing financial distress due to circumstances beyond their control. These require thorough documentation to support the application.
FINAL THOUGHTS
Tax directives play a vital role in simplifying and clarifying tax deductions for various income types. Whether you’re an employer, a fund administrator, or an individual taxpayer, understanding the requirements and processes involved can help you manage tax obligations more efficiently.
DISCLAIMER
Nothing in this article and/or post should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure accuracy, Tax A Sured (Pty) Ltd does not accept any responsibility for consequences of decisions taken based on this article and/or post. It remains your own responsibility to consult the relevant primary resources when taking a decision.
