Tax compliance by employers is becoming one of the major risk areas of doing business in South Africa. Ignorant or negligent employers can incur significant liabilities for the business. In terms of the Income Tax Act and related legislation employers are required to:

• Deduct the correct amount of employees’ tax from remuneration as prescribed by South African Revenue Services (SARS) in the Guidelines for Employers.
• Pay the amount deducted within 7 days after the month during which the amount was deducted, to SARS.
• Keep a record of remuneration paid and employees’ tax, UIF and SDL paid.
• Furnish employees from whom employees’ tax was deducted, with an IRP5 certificate within the prescribed period.
• Apply for tax directives where required and comply with tax directives issued.
• Notify SARS in writing of unused manual certificates lost or destroyed.
• Retain electronic certificate information for a period of five years.
• Complete and submit the prescribed EMP201 return to SARS within the specified period.
• Correctly classify employees for employees’ tax purpose (i.e. Dependent contractors, Personal Service Companies, etc.)
• Disclose the correct amount and classification of remuneration and employees’ tax deducted on IRP5 certificates and IT3(a) certificates.
• Value fringe benefits correctly in terms of the Seventh Schedule to the Act and disclose the correct amount on IRP5 certificate.
• Account for output VAT on fringe benefits.
  
  Of all the above, the most common cause of non-compliance originates from the incorrect classification of employees among independent contractors, personal services companies and labour brokers.