Tax Directives legislative changes implemented from 25 April 2022

Notice

The guide to Complete Tax Directive Application Forms was updated with certain legislation changes.

Information and Implications

Legislative changes to the Tax Directives process have been implemented by SARS. The following information is important for Fund Administrators, Insurers, Tax Practitioners, Advisors and taxpayers:
1.) Taxpayers who are members of a pension preservation or provident preservation fund, who have reached retirement age and are 55 years and older are now allowed to transfer the retirement benefit to another preservation fund or a retirement annuity fund tax neutral on a Form A&D – reason Transfer before Retirement [par 2(1)(c)];
2.) Taxpayers can now, on retirement, elect to use two thirds (⅔) or more of the total value of the retirement interest in the fund to provide a pension and / or annuity or purchase a living annuity and / or a guaranteed annuity from an Insurer. Alternatively, they can elect to keep a portion of the retirement interest in the fund which will provide a pension and / or annuity and use a portion to purchase a living annuity and / or a guaranteed annuity from an Insurer. However, it is important to note that the condition placed on a purchase of an annuity is that the value of each annuity (living and / or guaranteed and / or remaining in the fund) must be R165 000 or above, respectively;
3.) A new reason has been added on the IRP3a to cater for foreign companies that are not registered for PAYE to make severance payments to South African tax residents who have performed work within the Republic for the said company. When the employer pays the employee, the tax practitioner or SARS will select reason

• When the taxpayer/Tax Practitioner completes the return, a new field will be added on the ITR12 to cater for payments made by foreign entities. The taxpayer/Tax practitioner must select
• This will open a container whereby a new source code (3925) will be generated to capture the amount of the severance benefit received and the Tax Directive number which would have been issued for this purpose.

The purpose of the SARS Guide to Complete Tax Directive Application forms is to assist Fund Administrators / Long-term Insurers and / or employers on how to complete all of the various tax directive application forms in order to obtain a tax directive (IRP3) before a lump sum benefit can be paid to a member.

The SARS Guide to Complete Tax Directive Applications forms can accessed at the following Link

Need assistance

Should you have any technical queries send an email to taxtech@saiba.org.za