Employment Tax
South Africa | Final bills – Employment tax withholding (non-resident employers)
Summary
Vialto Partners issued an alert in August 2023 regarding the possibility of non-resident employers being required to deduct South African employees’ tax (Pay As You Earn, PAYE) which was published in the draft Tax Administration Laws Amendment Bill of 2023.
After extensive public consultations, the Standing Committee of Finance agreed for the draft legislation to be amended to make the requirement apply only to non-resident employers who conduct business in South Africa through a permanent establishment.
The Detail
The Tax Administration Laws Amendment Bill of 2023 released in August 2023 made provision for a legislative amendment requiring all 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.
However, there were various comments made from the tax industry, including Vialto Partners, about the administrative challenges and inconsistencies that would result from promulgating the legislation as it stood. Requiring all non-resident employers to register for PAYE in South Africa is considered overly onerous, particularly when they have not registered for corporate tax in South Africa.
The final bills have deleted the reference to “representative employer” and now require a non-resident employer to register for PAYE in South Africa if they conduct business in South Africa through a
permanent establishment. This amendment to the initial draft is made on the basis that, once an employer creates a taxable presence in South Africa, known as a permanent establishment, that entity has a requirement to register for corporate tax. This then follows a logical progression to register for Pay As You Earn. However, where no taxable presence exists in South Africa, for example in the case of employees working remotely in South Africa, there would be no requirement on that employer to register for Pay As You Earn in South Africa.
Nevertheless, the individual would still be required to register and pay income tax in South Africa in their personal capacity, based on their residence status and number of days worked in South Africa.
Contact us
Please reach out to your usual Vialto Partners contact should you have a question on the above.
Claire Abraham
Senior Manager, South Africa
Kesiree Mari
Director, South Africa
Gavin Duffy
Partner, South Africa
Further information on Vialto Partners can be found on our website: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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