Question

SECTION C – ESSAY TYPE QUESTIONS. [40 MARKS]
Answer ALL questions in this section.
Question 1 (15 Marks)
Toteng Communications (Pty) Ltd (TCL) is registered as an employer with the Botswana Unified
Revenue Service (BURS).
In addition to paying salaries and wages to its employees, TCL also provides employment benefits,
which are subject to PAYE, to certain of its senior management.
The managing director of TCL receives his remuneration free of tax.
Required:
(a) Summarise the essential features of the PAYE system and state the date by which tax deducted
must be paid to the Botswana Unified Revenue Service (BURS).

(b) State THREE employment benefits which are explicitly exempt from PAYE. (3 marks)
(c) Explain how the contractual arrangement regarding Toteng Communications (Pty) Ltd’s
managing director’s remuneration is treated for PAYE purposes. (5 marks)
(d) List the documents which an employer must provide to BURS at the end of the tax year and
briefly summarise what each contains. (2 marks)

Answer 1

1. An employer is obliged to deduct tax from remuneration paid to his employees in accordance with and in the manner specified in the Fifth Schedule of the Income Tax Act and shall carry out such other obligations as are imposed by that schedule (section 56). This form of withholding is what is commonly referred to as the PAYE system of withholding.

Employer Requirements:

1. Registration

2. Submission of Monthly Remittances - An employer with employees earning employment income above the taxable threshold (2500 per month) must deduct tax and remit it to BURS. The rate of tax applied depends on the amount of the employee’s income, as outlined in Tax Tables and Guidance notes. The prescribed form used for tax deducted from employee’s remuneration is Monthly remittance return for PAYE (ITW 7A). It must be accompanied by remittance slip(rem 2) which is available at BURS and a cheque.

3. Submission of annual return

4. Issuance of Tax Certificate to an Employee

b. Three Employment benefits are:

1. A PAYE settlement agreement (PSA) is in place – under a PSA, your employer settles, on your behalf, your income tax and NIC due to HMRC on certain types of benefits and expenses payments

2. Statutory exemptions and Extra-Statutory Concessions – the benefits or expenses payments are covered by a concession or exemption

3. A dispensation was in force – a dispensation was an arrangement your employer could make with HM Revenue & Customs (HMRC) for tax years up to and including 2015/16. It meant your employer did not need to report certain expenses and benefits at the end of the tax year. It also meant that your employer and you did not need to pay any tax or National Insurance contributions (NIC) on items covered by the dispensation.

d. Documents to be submitted :

1. IRP5/IT3(a) Employees Tax Certificate

2. Certificates received for local interest income, foreign interest income and foreign dividend income:

a. If you are married in community of property, the certificates received by both you (the taxpayer) and your spouse are required

b. If you married out of community of property, only the certificates that you receive are required

3. Documents relating to medical expenditure

4. The income tax certificate(s) received from the financial institution to which contributions for retirement annuities were made.

5. If you received a travel allowance or a fringe benefit for an employer provided vehicle, you must have a logbook to claim the business travel deductions.

6. All information relating to capital gain transactions (local and foreign) etc.