Checking fringe benefits before the EMP501 declaration
What a South African payroll bureau should check before a client declares in its EMP501 that every taxable benefit is on employees' certificates.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
The annual reconciliation is nearly done. The PAYE agrees month by month, the certificates are drafted, and the last thing between the bureau and submission is a declaration the client has to make: that every taxable benefit its employees received is on their certificates. The client's financial manager is about to tick the box.
Before they do, someone should ask what that declaration actually covers. A payroll bureau processes what it is told about. The company car the managing director drives, the loan the business made to a long-serving driver, the cellphone contract paid for a sales rep: if nobody told the bureau, none of them are on the certificates, and the declaration is wrong. This article sets out what to check and how to frame the questions.
The declaration is part of the EMP501
SARS's guide for employers in respect of fringe benefits says the employer's declaration that all taxable benefits are included in employees' certificates forms part of the annual EMP501 reconciliation.
The EMP501 is not only a reconciliation of numbers the payroll already holds. It includes a statement by the employer about what the payroll should hold. That shifts part of the work from the bureau's calculations to the client's knowledge of its own arrangements, and the bureau is usually the one best placed to draw that knowledge out.
What a missing benefit can cost
The same guide says the employer must determine the cash equivalent of each taxable benefit and show its nature and value on the employee's IRP5 or IT3(a). A failure to do so can attract a penalty of 10% of the cash equivalent or of the amount understated, at the time of writing.
Separately, SARS says an employer must issue an IRP5 or IT3(a) to an employee where remuneration is paid or has become payable, showing the year's employment remuneration and the employees' tax deducted. A benefit left off the certificate means the certificate understates remuneration, and the employee's own assessment starts from a wrong figure.
The benefits clients forget
Two benefits account for many of the gaps, and SARS's guide gives specific rules for both.
Company cars
The guide says the private use of an employer-provided motor vehicle is valued at 3.5% per month of the vehicle's determined value, or 3.25% where a maintenance plan was included in the purchase price. Rates and rules change, so confirm them in the current guide.
Questions to ask the client:
- Does any employee have a company vehicle available for private use, even occasionally?
- Was a maintenance plan included when the vehicle was bought?
- Did anyone receive or return a vehicle during the year, and on what dates?
The valuation detail is covered in the company car fringe benefit.
Low-interest loans
The guide says a debt owed by an employee to the employer is excluded from the low-interest loan fringe benefit where the debt, or the total of such debts, does not exceed R3 000 at any time.
The words "at any time" matter. A small salary advance that is repaid quickly may stay under the limit; a larger loan, or several small ones outstanding together, may not. Ask for the loan ledger, not a summary. The staff loan fringe benefit explains how the benefit is measured once it applies.
Others worth a question
Cellphone and data contracts, housing or accommodation, school fees paid for an employee's children, and assets given to staff all come up in practice. The aim is not to assume each is taxable but to make sure each has been considered.
A short questionnaire before sign-off
Send the client a written questionnaire before the declaration, signed by someone who knows the business's arrangements:
- List every vehicle the business owns or leases and who uses it.
- Attach the employee loan ledger for the full tax year.
- List any accommodation, school fees, cellphone or other costs paid for employees.
- Confirm any assets sold or given to employees during the year.
- Confirm that all benefits listed were reported to the bureau each month.
The answers either confirm the payroll is complete or show what has to be added before the reconciliation is finished.
Reconciling before the file is produced
In Achekam, for the EMP501, the system reconciles PAYE month by month and produces the file SARS's e@syFile Employer imports. It refuses to produce the file while anything SARS would reject remains. The firm then completes and submits the EMP501 in SARS's own software.
That reconciliation checks the payroll as recorded. It cannot know about a car or a loan that was never reported to the bureau, which is why the questionnaire comes first. A benefit that turns up late should be processed through the payroll so that the month-by-month figures and the certificates agree, rather than patched onto a certificate alone.
Who files, and the record that stays
Achekam prepares the monthly EMP201 figures and PDF and the IRP5 and IT3(a) certificates from approved runs. A person files them on SARS eFiling and records the reference in Achekam. A certificate is numbered and frozen only when SARS's required details are present, so missing employee details surface before submission; employee details before tax certificates covers that check.
Keep the client's signed questionnaire with the reconciliation. If SARS later asks why a benefit was or was not on a certificate, the file shows what the client declared and when.
The guide to keep open
SARS's guide for employers in respect of fringe benefits explains how each benefit is valued and reported, and the employer's declaration. Read its sections on vehicles and loans before sending the questionnaire, so the questions match the rules the client will be declaring against.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
