The answer to this query is based on legislation as at 01/07/2014.
Q: Please advise the PAYE consequences on a gratuity payment to an employer who was dismissed. Please also
advise income tax consequences on assessment.
A: We assumed (based on the
facts provided) that the amount paid (settlement) does not constitute a
'severance benefit' (as defined in section 1(1) of the Income Tax Act).
It therefore would be a paragraph (d)(i) (of the definition of gross income)
amount. As such it is 'remuneration' as defined in paragraph 1 of the
Fourth Schedule of the Income Tax Act.
In terms of paragraph 9(3)(a)
of the same Schedule the "amount to be deducted or withheld in respect of
employees' tax from any lump sum to which paragraph (d) or (e) of the
definition of 'gross income' in section 1 or section 7A applies, shall be
ascertained by the employer from the Commissioner before paying out such lump
sum, and the Commissioner's determination of the amount to be deducted or
withheld shall be final.”
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.