Directors PAYE

Any member of a Close Corporation who holds any office or performs functions similar to the office or functions of a director of a company is also considered to be a director for the purposes of the Income Tax Act.

As from 1 March 2002 private companies and close corporations will be required to deduct and pay over to SARS PAYE in respect of remuneration paid to their directors . The amount of PAYE is determined on a notional amount based on the remuneration of the director for the previous year of assessment.

The remuneration of a director of a private company is in many instances only determined after the end of the year of assessment as the accounts of the company on which a decision is made on the quantum of the remuneration are only finalised after year end. In terms of the amendment a director of a private company will on a monthly basis be subject to PAYE on a notional amount which is based on the remuneration paid or payable by the company to the director in respect of the last year of assessment which ended before the relevant month. Where the amount of remuneration for that last year of assessment has not been determined yet the notional amount will be based on the remuneration paid or payable to the director in respect of the year preceding that last year of assessment increased by an amount of 20 (or such other percentage as the Minister may from time to time determine by notice in the Gazette). Where however the remuneration for that preceding year has also not been determined as yet the Commissioner may determine the amount which must be deemed to be remuneration for purposes of that paragraph. The PAYE determined on an amount of remuneration as explained above will be a liability of the company and the company will have a right of recovery against the director. This amount will be deemed to be an amount of employees tax which was required to be deducted in terms of paragraph 2 of the Fourth Schedule.