The Receiver of Revenue classifies taxpayers in three main categories and as
a taxpayer you need to be clear on how that classification is done and its
implications for you. This will help you with your tax planning.
The first category includes people who pay only SITE (Standard Income Tax on
Employees). They are called "SITE only taxpayers". They are employees who
work for employers (not for themselves) and the tax that the employer
deducts from their salary every month to pay the Receiver is enough to keep
the Receiver happy for the whole tax year.
If you are a "SITE only" taxpayer, you do not need to submit any tax return
for the year, because the monthly tax you paid will be equal to the annual
tax you would have to pay.
So by paying monthly, you reduce your annual tax liability.
Before determining the tax for the month, employers must deduct the
contributions that the employee makes to pension (not provident) and
retirement annuity funds. This deduction will normally reduce the tax
slightly.
However, if your salary exceeds R60 000 a year, the monthly tax that you pay
on the amount that exceeds R60 000 is referred to as PAYE (Pay As You Earn).
You will have to submit a tax return, but this does not mean you have to pay
extra tax, because your liability has been paid in full.
The second category includes people whom the Receiver calls "SITE and PAYE
taxpayers". They are employees who are paid allowances as part of their
salaries and/or people who earn taxable salaries of more than R60 000 a
year.
These allowances are normally reflected on the pay-slips. Common allowances
are travel or car allowances, entertainment allowances, cell-phone
allowances and computer allowances. People in this category will be taxed
monthly, just as "SITE only" taxpayers, but they have to submit tax returns
annually. Why? Because the Receiver only taxes 50 percent of the travel
allowance monthly and wants you to show that the business kilometres you
travelled during the year are enough to justify being taxed only on that 50
percent.
Also, for other allowances, when you submit your tax return, the Receiver
gives you the opportunity to show (with invoices or other valid proof) what
you have paid for entertaining your customers, business calls, the computer
you use for business - though, unlike travel, these allowances are taxed in
full, monthly.
The third category of taxpayers are "provisional taxpayers".
These include individuals who are self-employed (who run businesses, either
alone or in partnership) and all companies and close corporations.
Individual taxpayers in this category must submit returns at the end of
August and February.
If you are employed and still, for example, run a spaza shop, you will
belong to either the first or second category (depending on how your salary
is made up) AND to the third category.
Even if you do not belong to the third category, but still the Receiver
sends you a provisional tax form, be nice to the Receiver`s office and fill
it in to avoid penalties and interest costs.