A tax directive is an instruction issued by SARS, in response to an application by the employer, fund or employee, specifying the exact rate or amount of tax to withhold on a particular payment. It exists because some payments don't fit cleanly into the standard monthly PAYE calculation.
What it means
Regular salary is taxed using the standard PAYE tax tables, which assume a fairly even, recurring income. Lump sums - severance pay, retirement fund withdrawals, leave payouts on termination - need a different calculation that SARS controls directly via a directive, rather than leaving it to the payroll system's standard logic.
Where it fits in
A directive application is submitted to SARS before the payment is processed wherever possible. The directive number and the tax amount/percentage it specifies must be applied exactly as issued - payroll cannot substitute its own PAYE calculation once a directive exists for that payment.
Key rules
- Required for most retirement fund lump sum withdrawals and retrenchment/severance payouts above the tax-free portion.
- Applications are submitted electronically and typically returned within a few business days.
- The directive is payment-specific - it does not apply to future payments of a similar kind.
- Paying out without a required directive, or against an expired one, is a common audit finding.
