Business: Imminent SARS Legislation Changes - Companies Must Prepare
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Companies Need to Prepare Payrolls for Imminent SARS Legislation Changes
Johannesburg, 12th March, 2009
Companies need to prepare for imminent new SARS legislation and reporting requirements expected to come into force next year, or face compliance issues and an administration nightmare if their payrolls are not geared up for compliancy.
This is according to NuQ executive chairman Ron Warren, an acknowledged tax and payroll expert, with experience in computerised payroll that spans 50 years. He says that the changes that will affect payrolls relate mainly to the content and frequency of what up to now has been an annual procedure and he warns companies to check whether their payroll software is geared up for compliancy to the new legislation.
“SARS has given notice that next year the EMP201 return will have to be made twice a year, and thereafter quarterly,” says Warren. “It is even possible that with the introduction of the new social security system the return will be required monthly.
This will mean that payroll systems will need to create tax certificates (but not issue them to employees) more than once a year, with only the final certificates at the end of the year being issued to employees.” He points out that this will require payroll systems to ensure that the tax certificate number on all certificates issued for an employee in each reporting period is the same, to enable SARS to record the details correctly in their system.
“This sounds easy to do but it is not that easy in practice,” he says. “It will require changes in the way the system generates tax certificates.” Up until now, employers needed to issue tax certificates to their staff at the end of the tax year, and submit a reconciliation of the amounts paid to SARS each month on an EMP 201 return with the total of the PAYE reflected on tax certificates. Warren says that last year, a new computerised reporting medium was introduced, called e@syFile, which required this reconciliation process to be done electronically by generating an EMP 501 reconciliation. This procedure has been left largely unchanged for the 2009 tax year just ended.
He points out that at the same time, there is a great deal of extra personal information that will now be required on tax certificates. All addresses must be supplied in a new format, where each element of the address must occupy a specific “line”, and payroll systems must provide for this new format.
Provision must also be made for a country code to be provided where a passport number is given on a tax certificate. Warren says that the most far reaching change is the option for payrolls to allow not just tax certificates but the associated forms EMP 501, EMP 601 and EMP 701 to be completed within the payroll system. (Forms EMP 601 and 701 are new forms being brought into use to cater for the re-opening of previous years’ reconciliations for late adjustments to tax certificates issued in previous tax years.) “The data must then be converted to XML format, when it can be sent direct to SARS without going through the e@syFile process,” he adds. “SARS will recognise this achievement by awarding such payrolls an official “compliant” status.”
As to the question of what people need to take into consideration when determining whether their payroll is compliant or not, Warren says that the difficulty is that many employers will find it difficult to determine whether their payroll will be compliant or not because they will generally be unaware of the new SARS requirements. “Also, there will be different degrees of compliance, in that some payrolls will probably not cater for the production of EMP 601 and 701 forms, leaving them to be completed manually,” he explains. “Even if they do cater for these forms, they may decide to not change their reporting file formats to XML, which will mean that employers will have to continue using e@syFile. Only if the payrolls do change to XML formats and cater for all the forms will SARS certify the payroll as ‘compliant’.”
With regard to payroll compliance, Warren says that it is important that an organisation’s payroll software uses the latest computer technology to enable it to be completely date driven. “Payroll systems that are not date sensitive, in the sense that pay adjustments for previous pay periods (including previous tax years) can be properly allocated to the correct pay period, will find it difficult to automatically handle the generation of EMP 601 and EMP 701 forms.”
“Legacy systems which are not date driven will find this very difficult, if not impossible, to do,” he adds. “Making the changes will also require an understanding of why the changes are required, as against just making them mechanically from specifications in a document, and your software supplier should have the expertise on board to explain the actual reason for the requirements.”
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