The South African Revenue Service (SARS) has signalled a stronger focus on Pay-As-You-Earn (PAYE) compliance, as highlighted in its 2023/24 Annual Report. SARS’s renewed attention includes a rigorous auditing strategy targeting employers, aimed at ensuring that PAYE is accurately withheld and remitted. With SARS’s enhanced focus on accountability, employers are encouraged to verify that their PAYE affairs are in line with the tax legislation and meet compliance standards.

Employers play a crucial role in the tax system, collecting PAYE on behalf of SARS from employees’ remuneration. SARS’s commitment to optimizing PAYE collections means that non-compliance—whether intentional or accidental—could now lead to heightened scrutiny and potential penalties. For employers with any uncertainty regarding their PAYE compliance, addressing these areas proactively has never been more important.

SARS’s Strategic Audit Focus: PAYE Under Examination

Through its Specialised Audit division, SARS has expanded its audit operations to include comprehensive, detailed reviews of both individuals and businesses. These audits focus particularly on PAYE compliance, along with areas such as the Employment Tax Incentive (ETI). SARS’s auditors, equipped with advanced training and a structured approach, are now well-positioned to identify non-compliance issues across various business types. This emphasis includes desk and field audits, reinforcing the importance of accurate PAYE withholding.

Key Aspects of PAYE Compliance

The scope of PAYE audits has broadened to cover much more than basic payroll checks. SARS is closely reviewing all elements of PAYE withholding, including fringe benefits, ETI and other forms of employee remuneration. Properly accounting for fringe benefits—such as company vehicles or housing allowances—is essential to avoid triggering further consequences. It’s imperative that employers are comprehensive and accurate in all aspects of PAYE.

In addition to audits, SARS has introduced measures to streamline compliance while improving oversight. Updates include refinements to directives, bi-annual PAYE submissions (EMP501), and enhanced eFiling options for third-party data submissions. These developments support a smoother compliance process for employers while also allowing SARS better insight into reported PAYE data.

Addressing Non-Compliance: Proactive Steps to Consider

For employers, ensuring PAYE compliance is vital to maintain good standing with SARS. Non-compliance with PAYE obligations can lead to penalties and reputational impact, and SARS’s recent investments in technology and training make the detection of discrepancies increasingly likely. Employers are therefore encouraged to prioritize PAYE compliance and consider preemptive measures to mitigate any potential risks.

Navigating PAYE requirements can be complex, and with SARS’s heightened attention on this area, consulting a tax professional is a prudent step for employers. A thorough review of PAYE practices now could preempt future issues, providing peace of mind and assurance of full compliance.

Written by Micaela Paschini, Tax Attorney at Tax Consulting SA