While the year has just begun, it is never too early to prepare for tax season. Ensuring that one’s personal and/or company tax is in order is a responsibility of all South Africans year in and year out, meaning it would be wise to get clued up on all the tax jargon and necessary information pertaining to the taxation process.
In this article, we will explore the IRP5 tax certificate – outlining what it is, sharing helpful information regarding its function, advising how citizens obtain their IRP5 tax certificates, and recognizing the importance of these certificates in the greater scheme of South African tax. In doing so, we hope to help you prepare for the tax season ahead and ensure that your personal and/or company tax forms and processes abide by the strict regulations enforced by the South African Revenue Service (SARS).
You may have stumbled upon the term IRP5 during your years working for an employer or seen it on search engines when preparing your business tax returns. Looking past its seemingly random abbreviation, the IRP5 is, in essence, an employees tax certificate that outlines remuneration received and deductions in employee tax for the duration of a particular tax year. All South African businesses are required to submit IRP5 tax certificates to SARS during tax season as this legal obligation is enforced by SARS in cases of failure to comply.
The purpose of an IRP5 tax certificate is to allow SARS to accurately determine the total tax liability of an individual working for an organisation and thus enforce tax and customs legislation stipulated in the agency’s agenda. Proper IRP5 tax certificate submission is an essential part of a businesses tax season preparations and all employees should maintain transparency with business owners to encourage appropriate submission, filing, and detailing of pertinent information outlined in the certificate.
Each employee is assigned an IRP5 tax certificate, allocating their subjection to tax liabilities for the duration of an official tax year, that possesses its unique certificate number, provides comprehensive company details, including a company’s name, physical address, and registration numbers for Pay-As-You-Earn (PAYE), Skills Development Levy and Unemployment Insurance Fund. The certificate also stipulates the employee’s personal details, including their employee number, full names, date of birth, identity number, income tax reference number and physical and postal address. An employees banking details may also be reflected should a salary be paid directly into an individual’s bank account.
Beyond these essential pieces of information, the IRP5 tax certificate includes the several source codes such as 3601 – Income, 4001 – Total pension fund contributions paid or deemed paid by the employee, and 4116 – Medical scheme fees tax credit. These are just a few of a long list of source codes outlined on an individual’s IRP5 tax certificate with relevant values attached to each code.
Employers are responsible and required by law to issue IRP5 certificates to all employees post the date of payroll report submission to SARS. Even with this being the case, business owners can be totally invested in other areas of the company and unable to meet this requirement. This can have severe consequences and, for this reason, business owners seek financial management support from expert employees tasked with this responsibility. Alas, in-house teams can be incredibly costly and business owners may wish to turn to third-party organisations such as MBS to deliver affordable and effective IRP5 distribution services. Furthermore, employees may seek the support of companies such as MBS to securely complete their IRP5 tax certificates, which are often daunting and time-consuming to process as they include extensive information which needs to be totally accurate.
The importance of attaining and completing an IRP5 tax certificate cannot be understated. It, quite simply, is a legal obligation required by all businesses and it is the responsibility of the owners and their employees to remain transparent about the proceedings regarding IRP5 tax certificates. What can be a challenging process can be made easier with the assistance of affordable professional solutions from companies such as MBS, and employees can avoid the consequences of failing to comply with tax and customs legislation through the efficient and effective offerings of said organisations.
With a greater understanding of IRP5 tax certificates, businesses and their employees can protect themselves from the consequences of failing to comply with SARS regulations and benefit from the rewards of being a tax-paying South African citizen.