Oracle Payroll enables you to calculate an employer's tax liability and deduct the appropriate sums from employee earnings. You can calculate employer and employee tax liabilities for all the taxes and statutory deductions that are applicable to your country. For example, this includes employer liability for state taxes such as State Unemployment Insurance and employee liability for federal, state and local taxes in the US, PAYE and NIC in the UK, PAYE, PRSI and USC in Ireland, Social Security, Unemployment and Complementary Pension in France, Standard and Special tax and Social Insurance in the Netherlands, and so on.
In each instance, Oracle Payroll enables you to enter details of the tax liability and process it at regular intervals.
See: Reports and Processes in Oracle HRMS, Oracle HRMS Configuring, Reporting, and System Administration Guide
Oracle Payroll allows you to process tax and insurance deductions for employers and employees, and helps you comply with the legislative requirements applying to your organization.
Yes. Oracle Payroll supports many country specific models of taxation, including the local, federal and state tax requirements of organizations operating in the US.
Yes. You can calculate taxes for different types of employer to represent the diversity of your organization. You can also make retrospective adjustments to allow for overpayments and underpayments.
Yes. The details of taxation policy and social security entitlements are constantly changing, but Oracle Payroll is always promptly updated so that your processing includes the most recent updates.
Yes. EDI allows two-way electronic transmission of documents between the Inland Revenue and employers. Oracle UK Payroll has developed a specified formatted file that, if used in conjunction with third party software, can be transmitted electronically to the Inland Revenue.
You can use Oracle HR to update your records throughout the year to show all the Class 1A National Insurance contributions for which your organization is liable. You can make this information available to employees so that they can preview their NI liabilities. You can then generate a report to view the final details and you can submit the complete and validated records to the Inland Revenue to comply with all reporting requirements.
Oracle HRMS for South Africa provides as startup data all the elements, balances, global values, tax abatements, tax rebates, tax tables, and other components needed to correctly administer PAYE.
If you include employees in more than one payroll run each processing period, Oracle Payroll's calculations for tax deductions take into account the sums already deducted in that period.
The system provides balances for taxable income, pre-tax deductions, tax, and PAYE. These include dimensions that correctly sum up all the necessary run results. The Tax balance is fed only by the amount of tax paid. The run results passed to the taxable income balance, however, are identified by balance feeds that you define. On termination of an employee or at the end of the tax year, the system calculates PAYE using the days worked in the tax year and the number of days in the current tax year.
The last payroll process or quickpay in a tax year (either quickpay or payroll run on last period of the tax year or quickpay or payroll run post termination) ensures that, for a given assignment, the amount in the Tax balance is transferred to the PAYE balance. During the year end reconciliation, the PAYE balance is used by the application to determine, what type of certificate should be issued.
The following table shows the tax deduction elements defined by Oracle Payroll for South Africa for PAYE administration and supplied as part of startup data.
| Name | Processing Type | Classification | Priority |
|---|---|---|---|
| ZA_Tax | Recurring | Statutory Deductions | 8500 |
| ZA_Tax_Costing | Recurring | Statutory Deductions | 8800 |
| ZA_Voluntary_Tax | Recurring | Statutory Deductions | 8502 |
| ZA_Tax_On_Lump_Sums | Non-recurring | Statutory Deductions | 8500 |
| ZA_Tax_Override | Non-recurring | Statutory Information | 6500 |
| ZA_Tax_Balance_Adjustments | Non-recurring | Statutory Information | 6500 |
| ZA_Tax Bal Adjust Ret Fund LS | Non-recurring | Statutory Information | 6500 |
| ZA_Tax Balance Adjustments LS | Non-recurring | Statutory Information | 6500 |
| ZA_Tax_On_Multiple_Lump_Sums | Non-recurring | Statutory Deductions | 8200 |
| ZA_Tax_On_Multiple_Ret_Fund_Lump_Sums | Non-recurring | Statutory Deductions | 8200 |
| ZA_Tax_RR_FF | Recurring | Statutory Deductions | 8450 |
| ZA_Tax_On_Ret_Fund_Lump_Sums | Non-recurring | Statutory Deductions | 8800 |
| ZA_Tax_PAYE_Employer_Contribution | Non-recurring | Employer Contributions | 10500 |
| ZA_Tax_PAYE_Employer_Contribution_NTG | Non-recurring | Employer Contributions | 10501 |
For correct usage of ZA_Tax Override element, see: Tax Override
You must link these elements to the appropriate payrolls before they can be given to employees and included in payroll runs. If you have set up segments of the Cost Allocation key flexfield to receive entries at the element level, you should enter these account codes in the Element Link window when you link the ZA Tax elements to your payrolls.
Note: The recurring ZA_Tax element can process after termination to allow for payments to employees after their termination date.
You enter a tax status for an employee using the ZA_Tax element. The following statuses are predefined:
| Tax Status | Description |
|---|---|
| Normal | This is the default tax status. Tax is calculated using the tax tables. |
| Provisional | Tax is calculated in the same way as for Normal Tax Status. |
| Directive Amount | The amount specified in the Directive Value input value is deducted. |
| Directive Percentage | The percentage specified is applied to the employee's year to date income and any tax paid to date is subtracted in order to arrive at tax due this run. |
| Close Corporation | Taxed at the percentage stored in the ZA_CC_TAX_PERC global value. |
| Labour Broker | No tax will be deducted |
| Personal Service Company | Taxed at the percentage stored in the ZA_PER_SERV_COM_PERC global value. |
| Personal Service Trust | Obsolete. |
| Private Director | Tax is calculated using the tax tables. |
| Private Director Zero Tax | No tax will be deducted. |
| Private Director with Directive Amount | The amount specified will be deducted from the Director's income. |
| Private Director with Directive Percentage | The percentage specified will be used in calculating the tax due. |
| Seasonal Worker | The calculation is performed based on the number of days worked. |
| Temporary Worker/Student | Taxed at 25%. |
| Zero Tax | No tax will be deducted |
There are various methods of calculating tax in South Africa. Oracle HRMS for South Africa has implemented the cumulative and average methods of annualization when calculating tax. In the cumulative method, an employee's income is projected to arrive at an estimated annual value, the tax tables are applied to this value, and the resultant annual liability is de-annualized to calculate the employee's liability for the current period. The average method makes use of a period factor which is calculated as follows: The total number of days in a year is divided by total number of pay periods in a year. This method multiplies this value by the number of months worked and thereafter adds the number of days worked. In this method, the total income is divided by the period factor and then multiplied by the total number of days in a year to arrive at annualized income. The de-annualized tax is calculated by dividing the annual tax by the total number of days in the year and multiplying that value by the period factor.
You can set the default tax method for a new employee as follows:
Navigate to Element Link window.
Date track to Start of the next Tax Year and query for Element 'ZA_Tax'.
Choose Input Values and select Tax Method.
Select Cumulative or Average as Default and update.
Note: For existing employees, you must use BEE functionality to perform a date track update for ZA_Tax element input value Tax Method. You can update the ZA_Tax element for individual assignments.
These four tax statuses cater for the taxation of director's remuneration:
Private Director: Tax will be calculated using tax tables.
Private Director with Directive Amount: The specified amount will be deducted from the director's actual income.
Private Director with Directive Percentage: The specified percentage will be applied to the actual income and paid by the director.
Private Director Zero Tax: No tax will be deducted.
Directors are often paid income in the current tax year that accrued in the previous tax year. SARS has specified that this income must not be taxed in the payroll and must be reported separately on an IT3a tax certificate with a reason code of 06. To produce this separate IT3a, you must create a separate assignment for the director and allocate a tax status of Private Director Zero Tax. Any income paid in the current tax year but accrued in a previous tax year must be paid using this assignment.
You override the tax calculation using the ZA_Tax Override element. However, you must use this functionality within the bounds of the existing Tax Legislation and it should be strictly controlled and subject to internal audit.
There are three types of override:
SITE Calculation
This forces a SITE Calculation to process in the following payroll run. In other words, the Tax Module recalculates the employee's tax liability for the year to date and then either refunds or recovers any outstanding tax in the current run where possible.
Note: If you select this option, any entries you make in other input values will be disregarded.
Tax Amount
This option causes the tax calculation to be overridden by the amount you specify. If you select this option, you must enter an amount in the 'Tax on Normal Income' and/or 'Tax on Annual Payments' input values. These feed the Tax balance and the corresponding Tax On balances.
Note: If you do not enter an amount in the 'Tax on Normal Income' and/or 'Tax on Annual Payments' input values, then no tax will be deducted.
Tax Percentage
This option causes the tax calculation to be overridden by the percentage specified by you. To arrive at the tax liability the employee's taxable income is calculated normally (so an annual income figure is calculated and the abatements are subtracted from this). The override percentage specified is then applied to the taxable income, instead of applying the tax table values. The tax calculation then proceeds as normal to arrive at the tax to be deducted in the 'override' run. This means that the annual tax liability is de-annualized.
Note: If you select this option and do not enter a Tax Percentage, then no tax will be deducted.
You can use the Amount/Percentage Override in a SITE run. However, please note that it is not possible for the Tax Module to correct any over or under deductions resulting from the override.
When Oracle Payroll processes an override for an assignment, a message is generated in the pay run that indicates which type of override has been processed. Additionally, the Override element appears in the Run Results.
Oracle Payroll corrects any over/under deductions resulting from an override in the subsequent payroll run(s).
The Tax Override functionality should not be used for an employee with a tax status of Zero tax as the assignment will complete in error in the payroll run. Other incompatibilities are:
| Tax Override Type | Assignment Tax Status | Result |
|---|---|---|
| Percentage | Directive Amount, Private Director Directive Amount | Assignments error in payroll run |
| Percentage with a Value of Zero or Blank | All Fixed Percentage tax statuses: Directive Percentage, Private Director Directive Percentage, Close Corporation, Temporary Worker/Student, Personal Service Company, and Labour Broker | Refund of all tax paid during the tax year |
| SITE Calculation | Directive Amount, Directive Percentage, Private Director Directive Percentage, Private Director Directive Amount, Close Corporation, Temporary Worker/Student, Personal Service Company, Labour Broker and Seasonal Worker | Assignments error in payroll run |
Use the Income Tax Ref No Bulk Upload concurrent program to upload bulk income tax reference numbers and to generate a report of the processing of the CSV file provided by SARS. For each record in the SARS CSV file, the program ensures that each employee has the correct income tax reference number as of the effective date of the application.
The program performs and reports the following:
If no income tax reference number exists for the employee, the correct number is inserted as of the employee's effective date (in Date Track Update Mode).
If an income tax reference number exists but does not match the CSV file, the correct number is inserted as of the employee's effective date (in Date Track Update Mode).
If an income tax reference number exists which matches the CSV file, no changes are made.
You run the Income Tax Ref No Bulk Upload process from the Submit Requests window.
To run the Income Tax Ref No Bulk Upload process
Query the Income Tax Ref No Bulk Upload process in the Name field.
Click in the Parameters field and select from the following parameters:
Mode:
Validate Only - In this mode, the application is not modified, it will only generate a report of the proposed processing.
Validate and Update - In this mode, the application is updated/corrected and the report of the processing is then generated.
SARS File Name - This is the exact file name provided by SARS
Click OK.
Click Submit.
The pdf output file lists the records based on the following processing results:
Not Processed - No Matching Employee Number Found
Income Tax Reference Number Correct - No Change Necessary
No Existing Tax Reference Number - Updated with new Number
Existing Incorrect Tax Reference Number Updated with New Number