September 2023
Employment Tax
Impact: High
Summary
If implemented, non-resident employers will be required to deduct and remit South African employee’s tax (Pay As You Earn) from employee’s remuneration. This monthly compliance obligation will be in line with requirements presently, in place for South African resident employers.
This change will bring considerable administrative obligations and challenges to non-resident employers who have employees in South Africa (such as requirements on opening of company bank accounts, authority registrations and filings).
Early planning, in anticipation of such a provision being implemented, is recommended. The effective date of this proposed change has not yet been set.
The Detail
The recently released Tax Administration Laws Amendment Bill of 2023 makes provision for legislative amendment requiring non-resident employers to withhold and remit PAYE on employee remuneration. Up to now there has not been an income tax withholding obligation on non-resident employers, with taxes being otherwise payable through the individual filing of provisional (IRP6) and annual (ITR12) returns to the tax authorities.
Many non-resident employers have voluntarily registered and remitted PAYE in order to comply with pre-existing remittance obligations of South African social levies (being the capped employee/employer Unemployment Insurance Fund and the uncapped employer Skills Development Levy), or the related requirements have been fulfilled by a representative employer that the company has in South Africa (where the representative employer has had the tax and social levy withholding obligation).
If implemented this requirement of registration, withholding and remittance will become compulsory on the non-resident employer. Interest and penalty exposures would apply for non- compliance.
Administrative and compliance challenges presented by this, under current processes, will be considerable. It remains to be seen if there will be any simplification to facilitate non-resident employers in these new obligations.
What is next?
Vialto Partners South Africa, through tax practitioner representative bodies, will be making extensive submissions on this proposal and seeking clarity on a number of anomalies created as a result of this proposed change.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
• Claire Abraham, Senior Manager | claire.abraham@vialto.com
• Kesiree Mari, Director | krishnavenee.mari@vialto.com
• Gavin Duffy, Partner | gavin.duffy@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com
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