Pay-as-you-earn (PAYE) is taxes an employee is liable to pay as they earn a salary/taxable income. These taxes get withheld by the employer and the employer needs to pay it over to SARS.

According to law, an employer must register with SARS within 21 business days after becoming an employer, unless none of the employees are liable for normal tax. Employees are liable for income tax when their income is above the annual tax threshold (i.e. the amount above which income tax becomes payable).

The annual tax threshold for 2020 is as follow:

• R79 000 if you are younger than 65 years.

• If you are 65 years of age or older, the tax threshold increases to R122 300.

• For taxpayers aged 75 years and older, this threshold is R136 750.

The amounts deducted/withheld must be paid by the employer to SARS on a monthly basis, by completing an EMP201.

The EMP201 is a payment declaration in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or Employment Tax Incentive (ETI), if applicable.

PAYE needs to be paid within 7 days after the end of the month during which the amount was deducted.

If the last day for payment falls on a public holiday or weekend, the payment must be made on the last business day before the public holiday or weekend.

Examples of amounts an individual may receive, and from which the taxable income is determined, include –

• Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits

• Profits or losses from a business or trade

• Income or profits arising from an individual being a beneficiary of a trust

• Director’s fees

• Investment income, such as interest and foreign dividends

• Rental income or losses

• Income from royalties

• Annuities

• Pension income

• Certain capital gains