What is a tax directive in South Africa?
A tax directive is an instruction from SARS that tells your employer or fund exactly how much PAYE to withhold from a specific payment, instead of leaving them to apply the normal monthly PAYE tables. It is used where the standard tables would get the withholding wrong: a once-off lump sum, irregular commission income, or a payment that has its own special tax treatment. The fund or employer applies for it, SARS works out the tax, and the payment is then made net of the amount in the directive.
You usually meet a directive at a turning point: leaving a job, retiring, a retrenchment payout, drawing from a retirement fund, or earning income that swings month to month. In each case the directive makes the tax come out right at the time of payment, so you are not left with a large surprise on assessment.
Why directives exist
Monthly PAYE assumes your pay is roughly even across the year. When a payment breaks that assumption, the tables misfire. A R400,000 retrenchment lump sum run through the normal monthly tables would be taxed as if you earned it every month, wildly overstating the tax. A large commission month does the same on a smaller scale. A directive replaces the guess with a figure SARS has calculated for that specific payment.
The main types of directive
The directive forms map to the situations that need them:
- Lump sum directives (IRP3(a) and IRP3(s)). For retirement fund lump sums, withdrawals, retrenchment and severance payments, and payments on death. These payments are taxed on the special lump-sum tables, not the normal income tables, and the fund cannot pay out until SARS has issued the directive.
- Fixed-percentage directive (IRP3(b)). For commission earners, freelance artists, and personal service providers whose income is variable. SARS sets a single percentage to withhold across the year so the deductions are even rather than lumpy. You can no longer pick your own percentage: SARS calculates it from the income and expenses you declare on the application.
- Fixed-amount directive (IRP3(c)). For specific cases such as hardship under the Fourth Schedule and certain trust and living-annuity situations, where a set rand amount is withheld each time.
A savings-component withdrawal under the two-pot retirement system also runs through a directive. The fund applies to SARS, which works out the tax at your marginal rate and tells the fund what to deduct before paying you.
A worked example: a fixed-percentage directive
You earn mostly commission and expect about R600,000 of taxable income for the year, but it arrives unevenly, so some months over-withhold and others under-withhold. A fixed-percentage directive sets one rate for the whole year.
Work out the expected annual tax on R600,000 (2026 year of assessment). R600,000 falls in the R512,801 to R673,000 bracket:
- Tax = R121,475 + 36% of (R600,000 less R512,800)
- = R121,475 + 36% of R87,200
- = R121,475 + R31,392 = R152,867 before rebates
- Less the primary rebate of R17,235 = R135,632 for the year
As a percentage of income that is R135,632 / R600,000 = 22.6%. A fixed-percentage directive at about that rate means your employer withholds roughly 22.6% of each payment, evenly, instead of letting a big month spike and a quiet month under-deduct. By year end the right amount has been withheld and your assessment should not throw up a large bill or a large refund. SARS does this calculation from the figures on your application; the arithmetic above just shows what the percentage represents.
Frequently asked questions
What is a tax directive used for?
It tells an employer or fund how much PAYE to withhold on a specific payment when the normal monthly tables would get it wrong. Typical uses are retirement and retrenchment lump sums, two-pot savings withdrawals, and smoothing PAYE for commission or other variable income through a fixed percentage.
Who applies for the directive, me or my employer?
The fund or employer making the payment applies to SARS, usually through eFiling, and the payment cannot be finalised until SARS issues the directive. You provide the information they need, but the application is lodged by the payer, not by you.
How long is a directive valid?
A lump-sum directive is for that single payment. A fixed-percentage directive (IRP3(b)) generally applies for the tax year for which it is issued, after which a new application is needed. The directive reflects the figures supplied at the time, so a material change in your income may call for a fresh one.
Does a directive mean I have paid all my tax on that payment?
Not necessarily the final word. The directive sets the withholding at the time of payment. The amount is still brought into your annual assessment, where it is reconciled with the rest of your income, so a difference can still produce a small balance owing or a refund.
Do I need a directive for a two-pot savings withdrawal?
Yes. The fund must obtain a directive before paying a savings-component withdrawal. SARS calculates the tax at your marginal rate, and the fund deducts that before paying you the balance. If you owe SARS, the directive can also account for that.
Get the directive right before the payment
Because a directive is applied at the moment of payment, it is worth understanding before a lump sum or a commission run is processed. Our guide to tax on a retirement or provident fund withdrawal explains the lump-sum tables a directive applies, and the income tax calculator shows how the normal tables produce the effective percentage in the example above. For payments that commonly need a directive, see how a two-pot savings withdrawal is taxed, how pension income is taxed in retirement, and how a directive smooths PAYE for a commission earner.
SARS sources:
Try it on your own numbers
TaxRationale runs this computation for your exact situation, free, with your data encrypted on your own device.
Start for Free