PAYE RECONCILIATION PROCESS

1. PAYE RECONCILIATION PROCESS 2012

2. Points for Discussion • Introduction & Background • What is a Reconciliation? • Overview of the Process • Easy File Electronic Reconciliation • Easy File Manual Reconciliation

3. WHY PAYE! Employer acts as an Intermediary Employer collects money from employee on behalf of SARS Employer (PAYE / SDL / UIF) GOVERNMENT Allocation of Revenue • HEALTH • SCHOOLS • EDUCATION • SECURITY • INFRASTRUCTURE Employees

4. CONCEPTUAL OVERVIEW – PAYE AS YOU EARN & INCOME TAX ATP (Processing Layer) EMPLOYER PAYE IT TAXPAYER PAYE RECON&PROCESSING APPLICATION / BFE / EMPLOYER TAX REPOSITORY (ETR) / U3TM U3TM / FORMS REPOSITORY / EMLOYER RECONCILED CERTIFICATES VALIDATE CAPTURING RECONCILE PRE-POPULATE STORE EMP 501, CERTIFICATES AND/OR EMP601 INCOME TAX RETURN EMPLOYER RECONCILIATION SUBMIT SUBMIT MATCHING INPUT CHANNELS INPUT CHANNELS 3RD PARTY DATA STORE EXCEPTION HANDLING EXCEPTION HANDLING IT/PAYE LINK CASE MANAGEMENT VALIDATION AND CONTROL TRACKING

5. WHAT IS RECONCILIATION • . . . which means you have to . . . • You need to start by knowing what you have declared and what you actually owe for the year • Recalculate tax liability per employee (actual liability) • Compare with actual tax deducted • Correct differences • Complete actual monthly total liability on EMP501 (not EMP201 amount) • You need to be able to work out how the total you have paid matches individual employee liabilities – for their IRP5s Reconciliation is a process to. . . • Match taxes declared on monthly EMP201s and the actual liabilities based on the IRP5s to be issued • Understand the difference between actual tax liabilities and payments made to SARS • Match back your actual liabilities to funds withheld from your employees

6. WHAT RECONCILIATION IS NOT • Reconciliation is not . . . • Just a reconfirmation of the payments for the amounts declared on your monthly EMP201 forms • . . . which means . . . • A reconciliation can be correct even if the balance identifies that you owe money or have a credit for the tax year • Note: It is possible you may have overpaid for the year, but submitting a refund may require careful documentation for this and prior years

7. OVERVIEW OF PROCESS… Run monthly payroll What does the employer do? 1 • Run the monthly payroll to determine your current declarations and monthly liabilities Submit monthly declaration and pay withheld liabilities • Declare this liability on form EMP201 and submit it together with the payment to SARS by the 7th of the month following the month of employee remuneration 2 Compute actual annual liability as per IRP5s to be issued • Compute the actual liabilities for transactions in the 2009/10 tax year based on your annual payroll • Imported as a CSV • Manual certificates issued 3 Match computed liability in step 3 to revised liabilities and payments – adjust errors • Remove liabilities/payments relating to prior year’s certificates • Remove all payments relating to interest or penalties • Reconcile actual declared liabilities & payments to certificates for this year and account for the differences Submit the reconciled declaration 4 • Submit your signed EMP501 and associated payroll data to SARS by 30 May 2010 • Pay any adjustments owing to SARS • Note: Employer will be liable to pay any adjustment owing to SARS 5

8. REQUEST RECON DOCS • ELECTRONIC FORMAT • e@syFile™ • MANUAL FORMAT • Can be requested from SARS by visiting your nearest SARS branch office • Note: The manual reconciliation documents are currently blank forms with no pre-populated employer information • e@syFile™ Employer is a software application that SARS provides to employers free of charge • ability to complete your documents off-line • ability to submit the data electronically or via electronic media

9. RECONCILIATION DOCUMENTS A D O B E • The technology that has been defined as the standard for form development within SARS which include – • EMP 501 – Employer Reconciliation Declaration • Annual – full 12 months (March – February) • EMP 601 – Tax Certificate Cancellation Declaration • IRP5/IT3(a) – Employee Income Tax Certificate • EMP701 – Reconciliation Declaration Adjustment

10. EMP501 – Page 1 Enter all relevant demographic information SPECIMEN Ensure you Sign and Date prior to submission

11. EMP501 – Page 2 SPECIMEN Enter a reason in the case of over/ understatement of declaration

12. EMP501 – Page 3 Enter your actual monthly liabilities Enter the payment amounts (excluding payments in respect of other years of assessment, penalties and interest SPECIMEN • Calculate the actual IRP5 tax liability for the transaction year: • Import payroll files • Enter manual certificates Calculate amount due by/to SARS. This does not have to equal to zero

13. IRP5/IT3(a) – Page 1 SPECIMEN

14. IRP5/IT3(a) – Page 2 SPECIMEN

15. EMP601 SPECIMEN

16. EMP701 SPECIMEN

17. Easy File Electronic Reconciliation Process Run monthly payroll What does the employer do? 1 • Run the monthly payroll and import the csv file by clicking import on the easy file application Successfully Imported • Once the csv file has successfully imported , update the employer detail and proceed to the Declaration screen 2 Self Assess, Ready to File • Once the declaration is completed, click on Self Assess, complete reason for over or under declaration • Click on Ready to File and click OK 3 Submit to SARS/ Electronic • Click on Submit to S ARS • Select either Internet / E Filing or electronic medium • Click Submit Debit/ Credit Result 4 • Pay any adjustments owing to SARS • Note: Employer will be liable to pay any adjustment owing to SARS 5 17

18. Easy File Manual Reconciliation Process IRP5/IT3A Certificates What does the employer do? 1 • Create IRP5/IT3A certificates by clicking on View or edit employees • Capture personal detail of employees and click on Save Employee • Click on Add Certificate and capture the financial information on certificate. Successfully Created 2 • Once the certificates has successfully been created, update the employer detail and proceed to the Declaration screen Self Assess, Ready to File • Complete the declaration , click on Self Assess, complete reason for over or under declaration • Click on Ready to File and click OK 3 Submit to SARS/ Electronic • Click on Submit to S ARS • Select electronic medium, click Submit • Save the Compressed zipped folder on a electronic device • Print and sign a copy of the EMP501 and submit with the zip folder • Submit at your nearest SARS Branch Debit/ Credit Result 4 5 • Pay any adjustments owing to SARS • Note: Employer will be liable to pay any adjustment owing to SARS 18

19. e@syFileTM EMPLOYER 19

20. e@syFileTM EMPLOYER 20

21. e@syFileTM EMPLOYER 21

22. e@syFileTM EMPLOYER 22

23. e@syFileTM EMPLOYER 23

24. e@syFileTM EMPLOYER 24

25. e@syFileTM EMPLOYER 25

26. e@syFileTM EMPLOYER 26

27. e@syFileTM EMPLOYER 27

28. RECON SUBMISSION OVERVIEW IRP5/IT3(a) EMP601 EMP701 EMP601 EMP701 Electronic Submission Channels SARS ORIGINAL RECON • Import CSV • Capture the following: • EMP501 • IRP5/IT3(a) • EMP601 • EMP701 EMP501 EMPLOYER RECON IRP5/IT3(a) P R O C E S S I N G EMP501 EMP601 e@syFile generates ZIP (full reconciliation) that can be manually submitted to SARS • Import XML e@syFile generated • Must be supported by signed Adobe: • EMP501 • EMP601 • EMP701 Partial Electronic and Manual Submission Channels EMPLOYER Branch Office REVISED RECON • The following manually completed forms: • EMP501 • IRP5/IT3(a) • EMP601 • EMP701 Post IRP5/IT3(a)

29. e@syFileTM EMPLOYER MENU HOME - Application Home REGISTRATION - eFiling Registration IMPORT - Import Payroll File EMPLOYEE ADMIN – View/Edit Employees MONTHLY PROCESS – EMP201 Submission & Payment) RECONCILIATION – Cancel Certificate Range, Declaration (EMP501) & Adjustments (EMP701) SUBMISSION – Submit prepared declarations to SARS AGENT APPOINTMENTS - process ITA88s issued to Employers EMPLOYER ADMIN – Add/Edit Employer UTILITIES – Various important functions 29

30. NEW FUNCTIONALITY AND ENHANCEMENTS Enhanced Error messages – Import and Declaration Improved processing time (import, submissions, merge) New, smaller output file format – encrypted ZIP file Improved submission process & turn around time Monthly Process – EMP201 submission and payments Inbox (listing all electronic correspondence from SARS) IT Registration – Bulk and Single registration ITA88 (Agent Appointments) EMP201 Statement of Account (later this year) EMP201 Mismatch and Allocation of payments (later this year) 30

31. FREQUENT ERRORS AND QUESTIONS Downloading and Installation errors Functionality errors – network and pc restrictions Submission - Access restrictions & incorrect user rights Transaction year, Period of Reconciliation, Year of Assessment – 2012, 201108, 2012 (standard) Employee Date of Birth – must match ID number Special Characters in CSV file / employee records Importance of updates (software version) Cancellation of multiple certificate ranges Declaration - Certificate sub-totals (PAYE, SDL, UIF) Managing data – importance of backups 31

32. Questions? 32