At this time of the year many employers get ready to pay their employees an annual bonus.
Tax on the bonus can be high so in many instances, the tax is provided for during the year by the employee through an additional amount of tax that is deducted from that employees’ pay each month.
In other cases, the bonus is dependent on the performance of the employer (or employee) and is therefore not a guarantee. In this case, tax has not been provided for so there is often a real shock when the employee sees how little he/she clears once the tax has been deducted.
In addition, it’s the time of year when many employers provide various gifts, functions, vouchers, hampers, etc. their employees as a gesture of thanks and to spread some goodwill amongst the employees.
In many cases these items provided by the employer are fully taxable, but are often not actually declared – SARS regularly takes employers to task on this issue during a PAYE / SARS audit – so it’s important to get this right!