Legal Requirement For Issuing an IRP5 to an Employee

Date: 11 July 2023

Author: Coenraad de Beer

With the new tax season upon us, we are again going through the motions of submitting our annual tax returns to SARS. Part of this process involves the collection of tax certificates to either confirm the information already pre-populated on the return, to correct any incorrect information or to declare additional information not yet known to SARS.

SARS have made several improvements to the individual income tax return over the years, one of them is the pre-population of certain tax information on your return. This means some of your income and deductions are automatically entered on your tax return. This process is made possible by third parties providing the necessary information to SARS. These parties include employers, medical aids, banks and other financial institutions.

The Employer's Annual Reconciliation Season starts on 1 April and runs till the end of May each year. During this time your employer accumulates all your tax totals for the year (income and deductions) and enters them on a document called an IRP5. Some organisations still make a distinction between an IRP5 and an IT3A, but the IT3A serves exactly the same purpose as an IRP5, it is only issued in cases where there was no need to deduct any tax from your income. These days the employee tax certificate is actually a hybrid document called an IRP5/IT3A, but for simplicity sake we will stick to the term IRP5.

Due to the improvements made to the individual income tax return, many employers believe it is no longer necessary to issue a tax certificate to the employee. There is this misconception that your IRP5 is actually "loaded" on SARS eFiling. This is not true, SARS is merely PRE-POPULATING your income tax return with information provided by your employer. The actual IRP5 certificate is a separate document, which should be issued by the employer to the employee, a legal requirement which is prescribed by the Income Tax Act.

Section 13 (1) of the Fourth Schedule of the Income Tax Act, No. 58 of 1962 reads as follows:

Subject to the provisions of paragraphs 5, 14 (5) and 28, every employer who, during any period contemplated in subparagraph (1A), deducts or withholds any amount by way of employees' tax as required by paragraph 2 shall, within the time allowed by subparagraph (2) of this paragraph, deliver to each employee or former employee to whom remuneration has during the period in question been paid or become due by such employer, an employees' tax certificate in such form as the Commissioner may prescribe or approve, which shall show the total remuneration of such employee or former employee and the sum of the amounts of employees' tax deducted or withheld by such employer from such remuneration during the said period, excluding any amount of remuneration or employees' tax included in any other employees' tax certificate issued by such employer, unless such other certificate has been cancelled by such employer.

Section 13 (2) prescribes the time afforded to the employer to issue the tax certificate to the employee:

The employees' tax certificate referred to in sub-paragraph (1) shall be delivered-

(a) if the employer who is required to deliver the certificate has not ceased to be an employer in relation to the employee concerned, within 60 days after the end of the period to which the certificate relates;

(b) if the said employer has ceased to be an employer in relation to the employee concerned but has continued to be an employer in relation to other employees, within fourteen days of the date on which he has so ceased; or

(c) if the said employer has ceased to be an employer, within 14 days of the date on which the employer has so ceased,

Section 13 (1) and (2) can therefore be summarised as follows:

Every employer, shall deliver to each employee, an employees' tax certificate within:

(1)   60 days after 28 February, if the employee still works for the employer;

(2)   14 days, after date of termination of the employee; or

(3)   14 days, after date the employer ceased to exist.

In Section 13 (5) the act goes further to say:

It shall be the duty of any employee or former employee who has not received an employees' tax certificate within the time allowed by sub-paragraph (2) forthwith to apply to the employer for such certificate.

So it remains the employee's responsibility to request this certificate from his/her employer and the employer is then legally obliged to honour this request.

Apart from the legal requirement resting on your employer to issue an IRP5 certificate, the onus rests on you the taxpayer to ensure that the information captured on his/her tax return is correct. Section 25(2) of the Tax Administration Act, No. 28 of 2011 states: "A return must contain the information prescribed by a tax Act or the Commissioner and be a full and true return". Non-compliance with this section of the act might lead to penalties or might even be seen as a criminal offence.

The only way to confirm whether the pre-populated information is correct, is to review it against the actual IRP5 certificate. Not all employers use computerised payroll systems and capture their IRP5's manually on SARS's e@syFile software. This is prone to human error and your employer might accidentally submit incorrect information to SARS. In some instances employers neglect to submit their annual EMP501 reconciliation to SARS, which means your income tax return will not be pre-populated at all and you will need a copy of the actual IRP5 in order to add this missing information to your tax return.

Finally, SARS might request supporting documents if they choose to review or audit your income tax return. It is not advisable to wait until SARS makes this request. You only have 21 working days, from the date of the supporting document request, to submit the necessary information to SARS. To prevent delays in the finalisation of your tax return, make sure you have all the necessary tax certificates in your possession before you submit your tax return. This does not only ensure that you are compliant with your tax obligations, but it will also assist your tax practitioner to accurately calculate your tax liability or refund.

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