PAYE: Pay As You Earn



Pay-as-you-earn tax (PAYE) is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns.

Who Needs To Pay PAYE?

When you earn a salary or commission from your employer – your employer is obliged to deduct tax from you monthly. This is based on how much you earn and whether you receive fringe benefits or not. Thus the name “pay-as-you-earn”. The amount you pay is not necessarily your final liability. I you earn more than R120 000 per year or if you have more than one income or have your own business, you are required to submit two Provisional Tax Returns as well as an Annual Tax Return – at which point you will be assessed to ensure that there is no shortfall. You can also be entitled to a refund. This serves as a double check that your employer has been deducting the correct amount of tax where applicable. PAYE is a way for SARS to get their money on a monthly basis instead of waiting until the end of the year.

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