Employers are obligated to deduct the correct amount of employees tax (PAYE) from an employees remuneration and to declare and pay such amount to SARS on a monthly basis. The amounts declared by the employer on the EMP201 monthly return is the total amount of all PAYE deducted from all employees during the relevant month.
This means that the employer cannot deduct amounts, which are more or less than the amount that is properly deductible from the employees remuneration and calculated at the appropriate tax rates or tax deduction tables. For this reason, the employer should not have any large or under over-deduction of PAYE unless the employee requested the employer in writing to deduct an additional amount of PAYE.
Employers are obligated to re-calculate the final tax liability at the end of the employees year of assessment, or employment period when the employee resigned, is retrenched, became insolvent or passed away before the end of the year of assessment. However, this often only happens when the reconciliation documents are prepared. The re-calculation of tax may then result in an over- or under-deduction of tax.