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marcelt

Tax paid by company

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Good day,

An employee was terminated in a previous month and has a fuel amount being processed in arrears as an in and an out for tax purposes. The company has no way of getting this tax due from the employee and has chosen to pay the tax on the employees behalf.

I know that there should be a tax benefit arising from the company paying the tax on behalf of the employee. Could you perhaps guide on how this benefit would be processed? The employees net salary would need to be R0 at the end.

Thank you.

Marcel Theron

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    SUGGESTED

    Good day Marcel

    That is a very tricky one,

    However, we do not have tax benefit arising from Tax CC (companycontribution), in fact this is not allowed. Please contact SARS and confirm with them on this benefit and ask how it should be  processed ( IRP5 codes to use aswell). Thank you

  • +1
    verified answer

    Hi Marcel,

    You are correct - if you are paying the tax on behalf of the employee it will give rise to Release of Debt. This can be processed on the fringe benefit screen and a line should already be predefined for you to use. You can process the tax amount on there. Do take note that the system will go into a loop, so as soon as you capture the tax amount on there, the tax will change again. 

    You can then use a line with no IRP5 code on the dedcution side to offset the net pay and bring the payslip to zero.

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