New IRP5/IT3(a) tax certificate procedures and tax reporting methods

Description

As of the 1999 tax year, the Receiver of Revenue (SARS) requires tax certificates to adhere to new guidelines. Employee IRP5/IT3(a) tax certificates must be submitted to SARS in a new electronic and a printed format. Pre-printed continuous stationary (with unique numbers) is no longer supplied or accepted by SARS.

In addition, SARS also requires (as of the tax year 2000) that tax calculations adhere to new guidelines. Employee earnings, deductions, fringe benefits, and non-earnings information must also be reported in greater detail on the IRP5/IT3(a) certificates.

This release note highlights the steps you must take in order to process IRP5/IT3(a) certificates on your R/3 system in accordance with SARS guidelines for the tax years 1999 and 2000.

Installation information

All previous LCPs for your particular release must already be installed before installing this LCP.

Change system parameters in customizing

- Tax Year 1999

For the 1999 tax year, you must perform the following steps in order to process the new IRP5/IT3(a) tax certificates:

Copying tax forms from one client to another

When applying the LCP for IRP5 tax certificates, the forms: WTAX, WT99, and WLBL are copied into client 000. In order to have these reports available in your logon system, you must run the report edit forms (RPUFRM00) and set the following parameters:

1. Enter the respective information in the client, country group, and name fields for the 'source from' and target from' section.

2. In the selection action section, choose 'copy'.

3. Choose 'Execute'.

Infotype Taxes (0149)

Maintain if applicable (from the appropriate date) the following fields on infotype Taxes (0149): Directive Number, Nature of Person, Registered Name, Registered Number, and Seasonal Flag.

Note: While entries in these fields are required information for the IRP5/IT3(a) certificates, entries in the fields do not cause retroactive tax calculations in the R/3 system.

Employee Identification Information

Ensure that employee identification information is maintained in the system for all your employees.

• If an employee has a South African identification number, store this information on infotype Personal Data (0002).

• If an employee does not have a South African identification number, store the employee's passport number on infotype Personal ID's (185).

Employee Address Information

Ensure that employee addresses have been maintained on infotype Addresses (0006).

SARS - Tax Registration

As an employer, you must ensure that your organization has set up registration information with SARS correctly. This information must also be maintained in the system, see in the IMG Maintain tax registration number for payroll (feature WWTRN) and PAYE tax reference information (table T5W66).

Determine if Tax Certificates Issued Using Old Method - Tax Year 1999

For the 1999 tax year only, you must determine if tax certificates were generated for employees using the 'old' tax procedures. If an 'old' tax certificate was generated for an employee, he or she will automatically receive the status (Exclude TW). In this case, an electronic tax certificate will not be generated for that employee. See in the IMG Determine if 'old' certificates issued (RPCTCIW0).

Generate IRP5/IT3(a) Tax Certificates

Once all the relevant data has been entered into the system (as described above), you are ready to generate electronic tax certificates. To do so, follow the IMG steps in Execute run administration (RPCTCAW0).

Running this program allows you to process the annual South African tax certificates for your employees. As a reference, the program also displays a log indicating the status of the tax certificate runs to date for the given tax year.

Once tax certificates have been successfully generated, you can download the relevant file(s) onto magnetic media and send it to SARS. If the data is rejected by SARS, either the whole set of employees may be re-processed, or individual employees may be removed from the processing. In both cases, a new print file and new data for SARS is created. Once the data has been accepted by SARS, you can print the print file and give employees a paper copy of the certificate.

IRP5 - Retroactive calculations

It is recommended that you close the tax year. To do so, go into the control record and set the earliest retroactive calculation date to 01.03.99 (or the beginning of your 1999 tax year).

If this is not possible, you must rerun IRP5 tax certificate generation process at a later point in time. If an employee's details have changed since the first IRP5 run, the system will automatically cancel the old certificates and issue new certificates.

Form - WT99

In order for any additional information to be added to the IRP5/IT3(a), you must use T512E.

Running IRP5s for people for whom payroll has not been run in a previous month

If an employee is not terminated, the system assumes (for purposes of the IRP5) that the employee is employed until the end of the tax year.

Change system parameters in customizing

- Tax Year 2000

In addition to the above steps, you must also maintain the following steps for the tax year 2000, in order to meet SARS new tax calculation requirements. Note: This must be done before running payrolls for the tax year 2000.

Gross Earnings Customer Wage Types

You must make the following changes to EACH of your wage types representing gross earnings.

1. Using the view maintenance for table T512W, select a wage type and choose 'Details'.

2. Delimit the applicable 'from' date to 01.03.99 (or the date in which you start the beginning of your tax year).

3. For processing class 4, change the specification to 'A' (Add to Results table without eliminating splits).

4. For processing class 20, change the specification from 3 to 8 (Pass on unchanged and Cumulate).

5. For processing class 71, set the appropriate specification for retirement fund calculations. The possible options are:
0: no part of the wage type is retirement funding;
1: all of the wage type is retirement funding;
2: take a percentage of the wage type to be retirement funding. (This is calculated by the constant FLXPF stored in table T511K).

Note: When applicable, you can also set the appropriate indicator for processing class 71 for taxable fringe benefits wage types.

1. You must assign the ONE cumulation (between 20 and 65) relevant for the wage type. Note: Each cumulation represents a SARS codes. This SARS codes determines the rules applied for taxation (for example, 3601 represents 'normal income' and 3605 represents 'annual payments').

2. Ensure that for cumulation 6 (taxable earnings) that the indicator is deselected.

3. Ensure that for cumulation 13 (Non-retirement-Funding) that the indicator is deselected.

4. Note: The indicator for processing class 12 should also not be set, as this is automatically calculated by the system.

Lump Sum Payments

For the handling of lump sum payments, see the OSS Note 0134327.

Arrear Pension Funds and Clearance Numbers

1. Maintain pension fund clearance numbers for pension fund arrears (from infotype External Insurances (0151)) in table T5W3A.

2. For pension funds only, you must also maintain clearance numbers in table T5W1K.

Note: Each insurance scheme must have its own wage type. Make adjustments to the system accordingly.

Wage types representing arrear pension funds must be stored in the SCRT table.

1. Using the view maintenance for table T512W, select the wage type and choose 'Details'.

2. Delimit wage type M556 with the 'start' date 01.03.99.

3. For processing class 66, set the specification to 2.

4. For processing class 67, set the specification to 1.

Note: With the above setting, the system will automatically pass the wage type into the SCRT table for arrear pension funds.

Form - WTAX

In order for wage types (arrear pension funds and lump sums) to be included on the form WTAX, you must add the wage types to the form. Using the view maintenance for table T512E, enter in the table all your wage types (including the clearance number). Note: If no clearance number is entered, tax exemptions are not permitted.

Retirement Funding Indicator

For taxable earnings codes (as specified by SARS), the system will automatically output the earning code twice. The earning code with a Y represents the retirement funding portion of this code, while an N represents non-retirement funding.

In the case where the tax code represents non-taxable earnings, the indicator will always be blank, as the earnings code can never be considered as non-retirement funding.

Dependent functions

See the OSS Note 129089 - New IRP5 for 1999

Further notes

1999 Tax Year

• Employees marked as seasonal employees (as indicated on infotype Taxes (0149), will have one IRP5 per period employed (the period between a hire and a termination). Periods of inactivity will not result in extra IRP5 certificates.

• The IT3(a) form, included within IRP5 processing, is virtually identical to the IRP5 certificate.

Tax Year 2000

In addition to the further hints for the tax year 1999, the following issues are also relevant for the tax year 2000:

• The rule WS33M has been amended. The employer may pay the employees contribution, but the contribution is then taxed according to the rules of medical aid paid by employer on behalf of employee. For Medical Aid, WMAR has been set up so that the amount is considered as non-retirement funding is therefore added into non-retirement funding and gross remuneration.

• Your wage types for the IRP5 must be stored in the SCRT table.

• SARS's new guidelines on earnings reporting allow for an easy audit trail to track tax deductions. SAP Payroll South Africa has been configured to adhere to SARS's guidelines. Changes to the standard R/3 tax processing procedure may result in an employee having to pay additional taxes upon assessment or a rejection of the tax certificate submitted. Therefore, amendments to the R/3 tax processing procedures are not recommended. Any modifications from the standard come at your own risk.