What does the EMP201 mean to you, do you really need 4 good reasons to fill it out? Probably not, but if you read on, you can find out everything you need to know about the EMP201, and how to ensure a timely and accurate submission.
What is EMP201?
The EMP201 is an employer payment declaration that requires employers to indicate the total payment made to employees. It includes Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) payment allocations, as well as the Employment Tax Incentive amounts if applicable for the period.
In terms of the Income Tax Act 58 of 1962, employers are required to:
- Deduct the correct amount from employees
- Pay those amounts to SARS monthly
- Declare such amounts paid to SARS on a Monthly Employer Declaration (EMP201).
You need to pay SARS the amounts deducted or withheld on a monthly basis. More specifically, you need to submit your EMP201 and the payment, if applicable, within 7 days after the end of each month.
Reasons why you need to fill out the EMP201 form
The 4 crucial reasons why you need to complete an EMP201 form are as follows:
- For your employees.
Having employees means ensuring you deduct tax from their salaries, and pay it over to SARS every month. In addition to deducting tax from their salaries, you need to take off UIF and SDL fees. By doing this, you are helping your employees pay their taxes, and be covered by the UIF if they ever need it.
- To avoid penalties.
You might need to pay interest and a penalty on late payments or outstanding amounts.
- Interest is payable at the prescribed rate if any amount of Employees‘ Tax, SDL or UIF contributions is not paid in full within the prescribed period for payment of such amount.
- A penalty equal to 10% in addition to the interest will be imposed on late payments or outstanding amounts
- If you fail to pay the relevant amount with intent to evade your obligation, you may be liable to pay a penalty not exceeding an amount equal to twice the amount of employees‘ tax, SDL or UIF contributions which you failed to pay.
- Because it is the law.
You are legally obliged to deduct the correct amount of tax from employees, and declare and pay those amounts using the prescribed EMP201 form by the 7th of each month.
If you are found guilty of an offence, you can be fined or sentenced to imprisonment for a period not exceeding 12 months. The following are just a few of the offences:
- fail to deduct employees‘ tax from remuneration or to pay the tax to the Commissioner within the prescribed period
- uses or applies employees‘ tax deducted or withheld, for purposes other than the payment of such amount to the Commissioner
- permits a false IRP5/IT3(a) to be issued or knowingly is in possession of or uses a false IRP5/IT3(a)
- furnishes false information or misleads his/her employer regarding the amount of employees‘ tax to be deducted in his/her case
- fails to deliver IRP5/IT3(a) to employees or former employees within the prescribed periods
- fails to maintain a record of remuneration paid and tax deducted.
- nuQ makes it easier for you.
nuQ duplicates the EMP201 form exactly. All you need to do is to copy the figures from each box on the return into boxes with the same numbers on the official return.
You may notice that the SDL and UIF contributions are exactly equal to the earnings multiplied by the appropriate rate (1% and 2% respectively). This is unusual, as payrolls calculate the amounts due per employee. Rounding differences will occur on each employee’s calculation, to make the amount due for the employee an exact number of cents.
How then do the totals on the return exactly equal the earnings multiplied by the appropriate rate, as the rounding differences per employee will almost certainly not be the same as the rounding difference when the amount due is calculated as a percentage of the total earnings? This is because nuQ adjusts the reported earnings of each employee to exactly equal the amounts due divided by the appropriate percentages.
In other words, the rounding differences are transferred to the earnings, instead of the amounts due. This is done to avoid silly queries from SARS that might arise (and have arisen in the past) because multiplying the total reported earnings by the percentages of those earnings which are payable might not give the exact amount reported as payable. This is a small example of the thought that Xpedia developers have put into their reports to help you.
The Employer Reconciliation process
The Employer Reconciliation process requires employers to submit EMP501 declarations that reconcile the EMP201 forms for the respective period.
After diligently submitting your Monthly Employer Declaration (EMP201) by the seventh of each month, you need to submit an interim Employer Reconciliation Declaration (EMP501) in September-October for the six months from 1 March to 31 August. Your final annual EMP501 submission is done during April and May for the tax year 1 March to 28/29 February.
This process assists you by:
- Enabling an easier and more accurate annual reconciliation submission
- Maintaining an up-to-date employee database
- Registering employees for Income Tax purposes, as required.
Get your EMP201 right
It is important to get your SARS red tape right from the start. This will ensure you avoid problems and penalties with the tax authorities later down the line.
Compiling the data and submitting the EMP201 can be easy if you use the right tools, and keep track of new SARS requirements and legislative changes.