We’ve seen it all too many times, and often it happens too late for something to be done about it. An employer is by law required to withhold employees tax from an employee and pay it over to SARS within 7 days of the end of the month in which the employee was paid their salary. In some cases the employer withholds the tax, but does not pay it over- a criminal offence- which leaves the employee in the lurch when the time comes to submit a tax return, request a tax clearance certificate or if SARS queries why the tax has not been paid over. Trying to fix it can take time, and be an unexpected turn of events.
How / why does it happen?
It could be down to poor administration or sometimes, the employer simply does not pay it over, or in the worst-case scenario, uses the funds. An employee would typically be able to pick up issues when filing a tax return- but this can be difficult to pick up if the employee does not file tax returns, especially if SARS does not (because the employee is below the taxable income threshold) require the employee to file a tax return.
The implications
An employer is liable to pay the tax over to SARS, and SARS has a right of recovery against the employer and may press criminal charges, charge penalties and interest against the employer for failing to pay the employees tax to SARS. The tax paid should reflect on an employee’s IRP5, and accordingly should automatically reflect on your tax return when you prepare your tax submission. If your employment income and taxes paid does not reflect on your tax return, either an error has been made or your employer simply has not submitted an EMP201 in respect of your income, and accordingly has not paid over your taxes to SARS. An employee still remains liable for tax on income earned- so if your employer has skipped the country, you still remain liable to pay the tax to SARS, which can place you in a bad spot if your employer deducted the tax from your earnings, and SARS expects you still to pay it from your own pocket.
What can you do about it?
Firstly, ask your employer to fix it and to submit the outstanding monthly employees tax submissions known as the EMP201. Your employer must furnish you with an IRP5 reflecting the amount of tax that was paid for that tax year. For future years going forward, always insist on an IRP5 at the end of the tax year so that you can rest assured that your employer has paid the tax to SARS.
What if my employer still hasn’t paid the tax they withheld from me?
You can report your employer/ former employer for failing to pay your taxes over to SARS. If you are worried about disclosing your identity, SARS has a whistleblowing hotline where you can report your employer anonymously. Essentially, deducting money from an employee and failing to pay it to SARS is an offence in terms of the Tax Administration Act and can be likened to theft, as well as tax evasion. An employer can be held personally liable for the taxes that should have been paid to SARS, and you should consider taking legal steps against your employer if they refuse to pay the tax to SARS.
This article is for information purposes only, and may contain errors and/or omissions. The writer accepts no liability for the information contained herein, and should not be regarded as legal advice. Seek professional advice in all circumstances.