Pay-As-You-Earn (PAYE) penalties are imposed on employers in terms of the Fourth Schedule to the Income Tax Act of 1962 [the Act], read with Chapter 15 of the Tax Administration Act, 2011, where there is non-compliance regarding an employer’s obligations.

The non-compliance can include:

  • Non-submission of an Employer Reconciliation Declaration (EMP501) on or before the due dates
  • Failure to submit IRP5 or IT3(a) Employee’s tax certificates (i.e. missing IRP5/IT3(a)s)
  • Submission of incorrect, incomplete or inaccurate data relating to the IRP5/IT3(a)s, even where the EMP501 has been submitted on time
  • Late payment of Employees’ Tax.

Where non-compliance penalties are imposed (in other words, for employers who fail to submit their reconciliation return by the due date or submit incomplete returns) employers will be subject to a percentage-based penalty. A penalty will be charged for each month that the employer continues to fail to remedy the non-submission. In total, the penalty may not exceed 10% of the total amount of Employees’ Tax deducted or withheld (or which should have been deducted or withheld) by the employer during the year.

Late payment penalties are levied as a once-off charge of 10% of the tax that should have been paid by the due date.

In accordance with section 214 of the Tax Administration Act, a penalty is due upon assessment and must be paid on or before the date for payment stated in the notice of the penalty assessment [AP34]. The payment due date will be stipulated on the AP34 notice issued to the employer.

This article is provided for information only and does not constitute the provision of professional advice of any kind.

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