Can an employee be held liable for the PAYE his employer didn’t pay over to SARS?
10 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I attend to a
number of employees who after years of service have now been advised that the
employer has dealt fraudulently with SARS and has not paid over employees taxes
SARS in an audit has two different opinions. One office
agrees the employees cannot be held responsible and liable for taxes not paid
by the employer the other has blatantly disallowed the PAYE credit on the
"fraudulently" issued IRP'5.
A: Ultimately the
liability to withhold employees’ tax is with the employer in terms of part II
of the 4th Schedule to the Income Tax Act. Where the employer did not withhold
employees tax from the employee, the employee may be held jointly liable (with
the employer) for the payment of the employees taxes.
In terms of para 13(4) of the 4th Schedule, any employer who
deducted or withheld employees tax from an employee must issue that employee
with a tax certificate with a tax certificate in a form and manner as
prescribed by the Commissioner.
The liability to deduct or withhold and pay any amounts of employee’s
tax over to SARS is with the employer. Provided that the employer therefore
deducted or withheld such amounts from the employee, the employer must issue a
tax certificate notwithstanding the fact that the employer failed to pay those
amounts to SARS. The employee must be able to prove that such amounts were
withheld by his/her employer in the form of payslips, service contract etc.
Where the no employees taxes was withheld from the employee, the employer has
the right of recovery from the employee, and the employer may refuse to issue a
tax certificate to the employee until such time as the employee has paid such
amount owing to the employer –(see para 5 of the 4th Schedule).
It is my understanding that the employer in this instance
withheld the employees’ taxes from his employees but failed to pay it over to
SARS. Provided that the employees can prove that such amounts were withheld by
the employer, SARS must take any amount of employees taxes into account proven
to have been withheld by the employer. This is my view but SARS may challenge
this as the 4th Schedule is not clear in this regard.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.