We should all be aware by now that SARS requires employers to submit a half yearly return of tax certificate information covering the six months March to August 2010.  This return must be submitted in September/October 2010.  The final Business Requirements Specification covering the return was released by SARS on their web site in the first week of August. 

Two matters that should be of special interest to employers in connection with the half yearly return are now discussed.

Income tax reference number

This is still an “optional mandatory” field.  If this number is missing from a tax certificate, SARS will electronically check their records and, if the employee has not been issued with a tax reference number, will automatically issue the reference number.  All such automatically issued numbers will be advised to employers through the medium of the e@syFile program which employers use to submit their tax certificate data and EMP 501 reconciliation to SARS. 

This action will take place early in 2011, before it is necessary for employers to file their normal end of tax year tax certificates and reconciliation.  SARS will no doubt issue a notification when the procedure is available.  Employers should then log in to e@syFile and ensure their computers are on line and able to communicate with e-filing.  Data will be automatically transmitted via e-filing to the employer’s e@syFile program, which will update the tax certificate records for the employees without tax reference numbers with the newly issued tax reference numbers.  Employers will then be able to import those newly issued tax reference numbers from the updated tax certificates into their payroll systems.

Should the employee already have been issued with a tax reference number, SARS will notify the employer of this fact, and it may be necessary for the employee to obtain the number from SARS.  The exact procedure to be followed will no doubt be made clear by SARS at the time.

Any new employees taken on after August 2010 will need to have tax certificate numbers, as these numbers will be mandatory for the February 2011 tax certificate submission to SARS.  A procedure to obtain these numbers will be made available –

·                     A manually entered ITREG document can be submitted to SARS via e@syFile while on line to e-filing.

·                     An immediate reply will be received via e-filing giving the new tax reference number, or else the reason why a number cannot be issued.

The Business Requirements Specification referred to above contains details of the data to be included on an ITREG form, which is essentially a tax certificate form without any earnings or deduction data.

Other mandatory data

There were other items of data for an employee which were mandatory on the 2010 tax certificate return, which if missing from a tax certificate would cause the tax certificate file to be rejected by SARS.  Some examples are an employee’s identity number, business telephone number, business address, residential address and postal address.

The Business Requirements Specification for the 2010 tax certificates clearly stated that if any such item was missing, a warning message would be generated on e@syFile when the record was read.  For the 2011 returns, however, the tax certificate would be rejected if any such mandatory data was missing.  A rejected tax certificate causes the whole file submitted to e@syFile to be rejected.

There are apparently many employers who still have not been able to obtain the mandatory information from their employees, and SARS has a difficult decision to make. 

·                     Should they be firm in implementing the mandatory requirements and reject any tax certificate files where the data is missing, it is probable that a great number of employers will have their files rejected.

·                     On the other hand, should SARS accept certificates where the mandatory data is missing, employers will tend to disregard any future warnings of this nature.

After discussing this dilemma with representatives of employers and suppliers of payroll systems, SARS is considering a further option – to generate a message on e@syFile for such missing items (similar to the warning message generated for the 2010 submissions).  However, the message would cause the processing on e@syFile to stop at that point, and the employer would have to reply to a displayed option to –

·                     abort the run, so that the errors could be fixed and the file resubmitted; or

·                     accept the error and continue the run, acknowledging that penalties could be raised by SARS because of the missing mandatory information.

I am not aware of aware of what decision SARS has made in this connection, or whether a decision has yet been made.  It is a difficult decision, and I would not like to be the person making it!  My advice to employers at this stage would be to ensure that all mandatory information (other than tax certificate numbers, for which SARS has made the special provision explained earlier) is obtained before the tax certificates are created – there is still a period of over two months in which to do this.