Tax compliance has become one of the most pressing responsibilities for employers across the African continent. As legislation evolves, digital systems mature unevenly, and cross-border operations become more complex, businesses face increasing pressure to ensure that every part of their payroll and reporting processes meets legal requirements.

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At the recent GPA Symposium in Johannesburg, Tax Manager Deoné Ferreira unpacked what tax compliance really means. She shared the practical challenges employers face, and the far-reaching consequences of non-compliance, as well as practical actions to minimise risk.

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What Tax Compliance Really Means

Tax compliance goes beyond filing returns or paying monthly liabilities. It represents a complete commitment to:

• Following the tax laws of each jurisdiction
  
• Filing accurate and timely returns
  
• Paying liabilities when due
  
• Maintaining transparent, accurate records
  
• Implementing internal controls to prevent tax errors or evasion
  
  

As Paul McNulty famously said: “If you think compliance is expensive, try non-compliance.” Many employers underestimate the breadth of the compliance definition and the rapid escalation of errors into penalties, criminal exposure, and reputational damage.

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Why Compliance Is Especially Critical for Employers

In South Africa, employers act as withholding agents, which carries significant personal liability. Under section 157 of the Tax Administration Act:

• If tax is withheld but not paid to SARS, the employer can be held personally liable.
  
• If tax should have been withheld but wasn’t, liability again falls on the employer.
  
• Incorrect IRP5s showing tax withheld when it wasn’t can make both employer and employee jointly liable for repayment.
  
  

In short: tax compliance responsibility rests squarely with the employer not the employee.

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Substantive vs Administrative Compliance: Where Businesses Often Make Errors

Compliance has two sides: substantive compliance and administrative compliance.

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Substantive Compliance

This relates to the actual tax treatment of transactions, including how items are taxed, classified, or reported.

Common risks include:

• Incorrect tax treatment in employment contracts
  
• Termination agreements are treated as severance when they are not
  
• Misinterpreting accrual rules vs payment rules
  
• Complexities around variable remuneration
  
• Fringe benefits and taxable advantages (e.g., expatriate tax consulting fees)
  
  

Practical tip: Always review agreements, understand whether payments are variable remuneration, and identify any suspensive conditions that affect accrual.

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Administrative Compliance

This covers everything related to filing, submitting, and communicating with authorities.

Typical pitfalls include:

• eFiling or e@syFile system failures
  
• Late payments due to processing delays
  
• Lack of clarity or poor communication from SARS
  
• Missing deadlines because supporting documents are unavailable
  
  

Best practice is to treat every interaction like evidence. Keep screenshots, call reference numbers, and written records. These will be necessary if requesting penalty remittance later.