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Deemed remuneration is applicable to directors of private companies and members of CCs. Because directors often receive performance bonuses that are very large in comparison to their salaries, SARS expects employers to pay additional tax during the year to prevent all the tax being due at the time the bonus is paid.

The previous tax year’s remuneration to the director is divided by the number of completed months over which it was earned, giving the deemed remuneration per month.

Cases where deemed remuneration is not applicable

• Remuneration in respect of the last year has been finalised and more than 75% consists of fixed monthly payments
• The director is newly appointed in the current year and wasn’t an employee of the company in the previous tax year.
• A person ceases to be a director but remains an employee

In all other cases, deemed remuneration applies.

Effects on payroll

• The director will always be taxed on actual remuneration as with normal employees.
• If tax on the deemed remuneration is greater than the tax on actual remuneration, the company will pay the difference.
• The director must repay the company for the amount paid on his / her behalf, but it does not give rise to a benefit as in the case of an interest free loan.

What to do if the deemed remuneration can’t be determined

• Use the previous year’s deemed remuneration, increased by 20%.
• If the previous year’s amount is not available, contact SARS to determine the amount.

What if the previous year’s remuneration hasn’t been finalised yet?

In this case, use the remuneration received so far. When the remuneration is finalised, adjust the deemed amount.

What to take into account when calculating deemed remuneration

All income and allowances must be included, but excluding amounts:

• Relating to the relinquishment, termination, loss, repudiation, cancellation or variation of any office or employment
• Which are lump sum benefit payments from a retirement fund
• In commutation of amounts due under any contract of employment or service
• Which are gains made by the exercise, cession or release of any right to acquire any marketable security.
• Which are gains made from the disposal of any qualifying equity share
• Which are gains made form the vesting of any equity instrument

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