We recently received a very informative article from Webber Wentzel on what can be quite a taxing question, if you’ll pardon the pun.
Employees are entitled to certain payments upon termination of their employment. Some are payments to which they are entitled in law while others are payments to which employees may be entitled in terms of their contracts of employment.
Employers are often uncertain what employees’ tax deductions are required to be made from such payments and the processes that must be followed to determine the amounts to be deducted.
Special tax rates, based on the retirement lump sum tax table, apply specifically to severance payments made to an employee.
What circumstances need to exist before an employee may lawfully claim an entitlement to the tax benefit specified above?
The answers to these issues, and more, are contained in the article.