A tax directive is super useful when you earn commission, variable income or are going to receive a large bonus or a lump sum. The tax directive is an instruction from SARS to allow your employer or fund manager to deduct a fixed amount or percentage of PAYE or withholding tax.
The following FAQ will help clarify some simple tax directive related questions you may have:
1. I was retrenched during the COVID19 lockdown period and my employer says that they need to apply for a tax directive. It’s been many weeks and still there’s no pay-out, can I apply for it too?
Your employer will have to apply for a tax directive by completing the IRP3(a) form and then send it to SARS. Unfortunately you cannot apply for this directive yourself.
Upon receipt of this form, SARS will calculate the correct amount of tax that your employer must withhold on the severance benefit, and you will receive that benefit (after they deducted the tax) from your employer.
2. How long is a tax directive valid for?
A tax directive is only valid for the year (if the directive application was for a fixed percentage) or the amount stated on the tax directive.
3. I recently became an estate agent and was told I need to apply for a tax directive. How do you apply for a tax directive and what will it do for me?
As an estate agent, it is likely that your income will fluctuate each month due to receiving your income in the form of commission, rather than a fixed salary. This means that your tax bill will also vary from month to month. For more on how tax on commission is calculated, you can read here.
As a Commission earner, it is also likely that you will have expenses to claim e.g entertainment, travel etc. These expenses are only deducted when you submit your return for assessment. Since your PAYE is calculated on your monthly gross commission, the tax deducted each month will be too high because it doesn’t take these expenses into account. These issues can be solved by applying for a fixed percentage Tax Directive.
A tax directive is an instruction from SARS to allow your employer to deduct a fixed percentage of employees’ tax from your income. You can either apply for it at your nearest SARS office or you can request your employer to apply for you online. Alternatively, you can send TaxTim a request to our Helpdesk and we can assist to do the application on your behalf.
4. How long does it take to get a tax directive from SARS?
It usually takes SARS two business days to issue a tax directive. unless it must be processed manually by SARS, in which case it can take a minimum of 21 business days to be issued.
5. What is a ‘Hardship directive’ and who qualifies for it?
Hardship directives are for taxpayers to lessen their hardship due to extenuating circumstances beyond their control, for example the current COVID-19 Pandemic. There are two types of hardship directives: fixed amount or fixed percentage of employees’ tax. It is important to remember that it’s the taxpayer’s responsibility to prove to SARS that they suffered a financial hardship due to circumstances beyond their control.
Remember, this type of directive does not reduce the overall tax payable. Instead it reduces the monthly tax burden, however the taxpayer will still need to submit a tax return and any over or under deduction of tax will be payable on assessment.
6. What information is required on the application form for a tax directive?
The basic information required for the application is the following:
More information may be required depending on the type of tax directive.
7. My employer has said that our retrenchment tax directives could take up to 6 months, is this right?
The tax directive applications, should only take 48 hours if they apply electronically or 21 working days if manual intervention from SARS is required. You can call SARS and ask them to check if any tax directive applications were submitted on your ID and tax number yet.
8. Our HR officer is currently on maternity leave and we need to submit tax directives as we are forced to retrench 10% of our workforce. Can we ask our accountant to do the applications for us on her eFiling profile?
Yes, you can ask your accountant to help you. She however needs to have an Organisation or Tax Practitioner eFiling profile to be able to submit the applicable tax directive applications.
9. Why do I have a tax payable amount due to SARS on assessment if my employer deducted tax as per my tax directive?
The tax deduction as per the tax directive is only an estimate according to the information that SARS has on their system at the date of application – it is not necessarily the final tax deduction. When you submit your annual return, your total tax liability for the year will be calculated based on your actual annual taxable income and if too little tax was paid during the tax year on your total taxable income, there will be an amount payable to SARS on assessment. Similarly, if too much tax was paid during the year (i.e. the fixed percentage tax directive was too high) then you will be due a refund on assessment.
10. Can TaxTim assist with Tax Directive applications?
Yes, we are able to assist with the Fixed Percentage and Fixed Amount Tax directives only. Please contact our Helpdesk if you require this service.
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