TERS payments are exempt from taxable income in terms of section 10(1)(mB) of the Income Tax Act (i.e. not subject to PAYE, UIF, SDL etc.).

 

The PAGSA has received confirmation from SARS that no IRP5 code should be used for TERS payments.

 

If TERS is paid to you, the employer, to pay to your employees, you are simply acting as a paying agent.

 

Payroll Setup

You can still pay the TERS payment through the payroll for reporting, payslip and payment purposes, but no IRP5 code should be used.

 

 

This payment is exempt from remuneration (i.e. not subject to PAYE, UIF, SDL etc.) but is subject to income tax on assessment.

 

Payroll Setup

If the employee receives a payment from a ‘Covid-19 relief fund organisation’, the payment should be processed as an exempt earning using IRP5 code 3602.

 

Once we get confirmation on what IRP5 code should be used (once the new PAYE BRS is published), it can be changed to the new code.

 

New IRP5 codes will be implemented in the September 2020 release.

 

For the interim, define an earning line for ‘Covid-19 relief fund organisation’ as set out in the example below:

 

 

The IRP5 Code can then be changed before the mid-year IRP5 submissions.

 

 

According to the Fourth Schedule to the Income Tax Act, a bona fide donation made by the employer on behalf of the employee for which the employer will be issued a receipt as contemplated in section 18A(2)(a) will be allowed as a tax deduction, limited to 5% of balance of remuneration before taking into account the tax deduction of donations.

 

To alleviate the cashflow difficulties of employees where their employers contribute to the “Solidarity Fund” on their behalf (for which the employer will be issued a receipt as contemplated in section 18A(2)(a) of the Income Tax Act), Government is proposing a special relief measure by temporarily increasing the current 5% tax limit.

 

An increased limit will be available (depending on the employee’s circumstances), namely:

 

• A maximum limit of 33.3% of that remuneration per month for three months from 1 April to 30 June, or

• A maximum limit of 16.66% of that remuneration per month for six months from 1 April to 30 September.

 

“Solidarity Fund” means the Solidarity Response Fund, registered with the Companies and Intellectual Property Commission as a non-profit company under registration number 2020/179561/08.

 

This is only applicable to contributions to the Solidarity Fund and will be reported against the new IRP5 code 4055.

 

Any other donation is still limited to 5% - this will be reported against IRP5 code 4030. (It must be clarified in the SARS PAYE Business Requirements Specification whether a donation to the Solidarity Fund for which a portion of this 5% tax deduction was claimed, must also be reflected against code 4030).

 

Payroll Setup

New IRP5 codes will be implemented in the September 2020 release.

 

For the interim, define a deduction line for ‘Solidarity Fund' as set out in the example below:

 

If the employee wants to contribute more to the fund, than what is allowed as tax deductible, create a separate deduction line, for the Not Tax-deductible portion.

 

The IRP5 Code can then be changed before the mid-year IRP5 submissions.