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FAQs for PAYE Employer

 

  1. What is PAYE?
  2. What are emoluments?
  3. Who is an employer?
  4. How and when to register as an employer?
  5. What happens if an employer fails to register?
  6. Who is an employee?
  7. Are all employees subject to PAYE ?
  8. What are fringe benefits?
  9. Are all emoluments subject to PAYE?
  10. What if an employer is not sure if a payment amounts to emoluments?
  11. How does PAYE operate?
  12. How does the employer know the deductions of his employees?
  13. What happens if an employee does not furnish an EDF ?
  14. What if there is a change in the deductions of an employee?
  15. How to calculate the amount of PAYE to be withheld?
  16. How to calculate PAYE on Bonus?
  17. How to calculate PAYE on arrears of salary?
  18. What if an employer does not withhold the correct amount of tax?
  19. What if an employee insists for no tax to be withheld from his salary?
  20. Can an employer refund any excess tax deducted in a previous pay period?
  21. How to remit tax withheld?
  22. When to remit tax withheld?
  23. What happens if an employer fails to remit tax withheld?
  24. What happens if a person; ceases to be an employer?
  25. Should any document be given to employees as regards emoluments drawn and tax withheld?
  26. Should the employer file any return with the MRA?
  27. What books and records should be kept by an employer?
  28. What is a PAYE audit?
  29. What constitutes an offence in relation to PAYE?
  30. How to obtain additional information?

  1. What is PAYE?

    PAYE stands for Pay As You Earn. It is a system whereby employers are required to deduct tax from the emoluments of their employees and to pay over the tax withheld to the Mauritius Revenue Authority (MRA) every month.

     

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  2. What are emoluments?

    Emoluments mean any advantage in money or in money's worth which is salary, wages, leave pay, fee, overtime pay, prerequisite, allowance, bonus, gratuity, commission or other reward or remuneration in respect of or in relation to the office or employment of an individual and includes fringe benefits.

    Emoluments also include superannuation, pension, retiring allowance, compensation for loss of office or other reward in respect of or in relation to a past employment or loss or reduction of future income.

     

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  3. Who is an employer?

    An employer is a person responsible for the payment of emoluments.

    Person includes companies, organisations or other body of persons, whether corporate or unincorporate e.g. .clubs, associations, etc.

    A person who acts as an agent of an employer and is responsible for the payment of emoluments to an employee or to a former employee is deemed to be an employer for PAYE purposes e.g. an insurance company that pays pension on behalf of an employer under a superannuation fund.

    The law requires an employer to register as an employer with the MRA.

     

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  4. How and when to register as an employer?

    Every person who becomes an employer should, within 14 days of his becoming an employer register with the MRA by submitting a PAYE Employer Registration Form (ERF) duly filled in.

    Forms can be obtained from the MRA, Ehram Court, Ground Floor, Cnr Sir Virgil Naz and Mgr Gonin Streets, Port Louis. Tel. no. 207-6010

    On registration, the MRA provides the employer with:

    • his PAYE Employer Registration Number (PAYE Employer Registration No.);
    • PAYE Employee Declaration Forms (EDF) to be filled in by his employees and to be furnished to him;
    • PAYE Remittance Voucher Booklet

     

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  5. What happens if an employer fails to register?

    Failure to register as an employer with the MRA within the due date is an offence. The employer shall, on conviction be liable to a fine not exceeding Rs 5,000 and to imprisonment for a term not exceeding six months.

     

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  6. Who is an employee?

    A person who receives or is entitled to receive emoluments is an employee.   Since emoluments include pension in relation to past employment, a person in receipt of such pension is treated as an employee for PAYE purposes.

     

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  7. Are all employees subject to PAYE ?

    No. An exempt person is not subject to tax under the PAYE system.

    An exempt person is an employee whose emoluments do not exceed Rs 23, 077 per month;

     

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  8. What are fringe benefits?

    A fringe benefit is any advantage in money's worth provided by an employer to an employee. It forms part of emoluments and is subject to PAYE.
    Fringe benefits include housing benefit, car benefit, tax benefit, interest free loan benefits, free meals to employees, full board and lodging to expatriates, personal expenses of the employee which are borne by his employer and any other advantage in money's worth.

    The tax on the emoluments of an employee which is borne by his employer constitutes an advantage to the employee and is referred to as tax benefit. The taxable values of fringe benefits are given in Annex II to the Guide On PAYE

     

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  9. Are all emoluments subject to PAYE?

    All emoluments are taxable except the following:

    1. Emoluments derived from the office of the President or Vice-President.

       

    2. Any rent allowance payable to a person appointed to an office in :
      • the Police Force;
      • the Fire Services;
      • the Forests Division of the Ministry of Agriculture andNatural Resources;
      • the Prisons and Industrial School Service; the Ministry of Fisheries;
      • the Department of Civil Aviation;
      • the Fire Unit of the Mauritius Marine Authority.

       

    3. Any housing allowance not exceeding Rs 100 per month payable by an employer to an employee under any enactment or by virtue of an award made under an enactment.

       

    4. Any transport allowance payable by an employer to an employee by virtue of the terms and conditions of service equivalent to :
      • the return bus fare between residence and place of work;
      • petrol allowance, commuted travelling allowance and travel grant payable by the Government of Mauritius and the local authority to their employees; or
      • the actual petrol or travelling allowance paid or 25 % of the monthly basic salary up to a maximum of Rs 11,500, whichever is the lesser, provided that the employee makes use of a private car registered in his own name for attending duty and for the performance of the duties of his office or employment.

       

    5. Passage benefits provided under a contract of employment not exceeding 6% of the basic salary.

       

    6. The first Rs 2 Million of the aggregate amount received:
      1. as lump sum by way of commutation of pension or by way of death gratuity or as consolidated compensation for death or injury, and paid :
        • by virtue of any enactment;
        • from a superannuation fund;
        • under a personal pension scheme approved by the Director-General;
      2. as lump sum under the National Savings Fund Act;
      3. by way of retiring allowance;
      4. by way of severance allowance determined in accordance with the Labour Act,
      on such conditions as may be prescribed.

       

    7. Any payment of foreign service allowance, reimbursement of the cost or payment of personal and private expenses including medical expenses, to homebased staff of overseas mission.

       

    8. Any advantage in money or in money’s worth received as lump sum by an employee voluntarily terminating his contract of employment in the context of a factory closure pursuant to the Cane Planters and Millers Arbitration and Control Board Act or under the Voluntary Retirement Scheme under the Sugar Industry Efficiency Act 2001.

       

    9. Any benefit to an employee for a payment by his employer to provide a pension or retiring allowance for the employee or his dependants and which is an allowable deduction under section 22 or 61, as the case may be.

       

    10. Any benefit to an employee for a payment by his employer to a scheme approved by the Director-General to provide against medical expenses for the employee or his dependants and which is an allowable deduction under section 22 or 61, as the case may be.

       

    11. Emoluments of a non-citizen who holds office in Mauritius as an official of a Government other than the Government of Mauritius and is posted to Mauritius for that purpose.

       

    12. Any foreign service allowance payable under a contract of employment to staff of statutory bodies posted abroad, as may be approved by the Director-General.

       

    13. Any retirement pension not exceeding the exemptions and reliefs in respect of Category A payable to a citizen of Mauritius who is not resident in Mauritius.

       

     

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  10. What if an employer is not sure if a payment amounts to emoluments?

    If there is any question or doubt as to whether an amount is or is not emoluments, the employer should refer the matter in writing to the MRA setting out all the facts.  You may use fax for this purpose. 

    The MRA will endeavour to give a decision in writing as soon as possible.

     

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  11. How does PAYE operate?

    For each pay period, an employer is required to deduct from the emoluments of his employees the exemptions and reliefs to which they are entitled in order to arrive at their chargeable income if any. The tax to be withheld on the chargeable income is then computed by using the appropriate tax rate.

    The exemptions and reliefs that is deducted from the emoluments of an employee in a pay period is the total exemptions and reliefs claimed by the employee for that year in his EDF divided by the total number of pay periods in the tax year.  Payment of end of year bonus is counted as an additional pay period. So if wages/salaries are paid monthly, the exemptions and reliefs is divided by 13, if paid fortnightly, by 28 and if paid weekly, by 56.

     

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  12. How does the employer know the deductions of his employees?

    Employees who wish to have their exemptions and reliefs (see Annex) for an income year to be taken into account for the purpose of calculating the amount of tax, if any, to be withheld from their emoluments, should submit to their employers an Employee Declaration Form (EDF) duly filled in. Blank EDF is provided to employers at the start of each income year by the MRA.

     

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  13. What happens if an employee does not furnish an EDF ?

    The employer deducts tax at the flat rate of 15% from the emoluments of the employee where the emoluments for the month exceed Rs 23,077.

     

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  14. What if there is a change in the deductions of an employee?

    An employee can file a fresh EDF, reflecting the change in his exemptions and reliefs, at any time during an income year. Where an employee furnishes a fresh EDF, the employer should adjust the chargeable income of the employee for each of the remaining pay periods of the income year by an amount equivalent to the variance divided by the number of pay periods remaining in the income year. For the purpose of arriving at the number of remaining pay periods, the month of December should be taken as 2 pay periods to account for the end-of-year bonus.

     

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  15. How to calculate the amount of PAYE to be withheld?

    Every employer should, at the time emoluments are paid or made available to his employees, withhold tax from those emoluments based on the chargeable income of the employees.  To arrive at the chargeable income of an employee, the employer should deduct from the monthly gross emoluments of the employee, 1/13, 1/28 or 1/56 of the total exemptions and reliefs per EDF depending on the number of pay periods in the income year to arrive at the chargeable income, if any. The tax to be withheld should be calculated on basis of the appropriate tax rate.

     

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  16. How to calculate PAYE on Bonus?

    Where an exempt person is in receipt of an end-of-year bonus and leave pay prescribed in any enactment in his favour, no tax will be withheld from that bonus and leave pay.

    The bonus should be treated as emoluments of a separate month and tax should be calculated on a cummulative basis.

     

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  17. How to calculate PAYE on arrears of salary?

    Where a person in the following or any subsequent income year receives arrears of emoluments earned in an income year, those emoluments are deemed to have been earned in the income year in which they are received and are subject to PAYE in the pay period in which they are paid to the employee.

     

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  18. What if an employer does not withhold the correct amount of tax?

    An employer who fails to withhold the right amount of tax is liable to pay to the MRA the amount of tax which has not been so withheld but the employer is entitled to recover that amount from the employee.

     

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  19. What if an employee insists for no tax to be withheld from his salary?

    Where tax is required to be withheld from the emoluments of an employee, the employer should withhold the correct amount of tax from the emoluments of the employee unless he is directed by the MRA not to withhold any tax.

    Where an employee proves to the satisfaction of the MRA that he is not chargeable to income tax for an income year, the MRA may, by written notice direct the employer that no tax shall be withheld from the emoluments of that employee. On receipt of the written notice from the MRA, the employer should give effect to the direction.

     

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  20. Can an employer refund any excess tax deducted in a previous pay period?

    Refund of income tax can only be made by the MRA on submission by the employee of his return of income at the end of the income year.  In no circumstances can an employer refund part or whole of the amount of tax already withheld from the emoluments of an employee and remitted to the MRA.

     

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  21. How to remit tax withheld?

    Tax withheld by an employer under PAYE should be remitted to the MRA either:

    • by cheque or cash directly to the MRA; or
    • electronically through a computer system approved by the MRA.

    Where payment is made by cheque/cash, the payment should be accompanied by a remittance voucher provided by the MRA duly filled in.  In case of payment by cheque, it may be posted or deposited at the Counter of MRA.

     

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  22. When to remit tax withheld?

    Tax withheld under PAYE should be paid to the MRA within 20 days from the end of the month in which the tax was withheld.  However, in case of electronic payment, the tax withheld sould be credited to the account of the MRA on or before the end of the month immediately following the month in which the tax was withheld.

     

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  23. What happens if an employer fails to remit tax withheld?

    A penalty of 5% of the amount of tax remaining unpaid as well as interest at the rate of 1% per month or part of the month during which the tax remains unpaid will be added to the amount of tax not remitted to the MRA by the due date. The amount of tax unremitted, the penalty and the interest become payable without demand. Legal proceedings may be initiated to recover the total amount due.

     

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  24. What happens if a person; ceases to be an employer?

    He should, within 7 days :

      • Give written notice to the MRA to that effect
      • pay to the MRA any amount of tax required to be withheld but not remitted
      • give to your employees their Statement of Emoluments and Tax Deduction
      • submit a Reconciliation Statement to the MRA.

    In the event of the liquidation or bankruptcy of the employer, the amount of tax withheld does not form part of the estate in liquidation or bankruptcy and must be paid in full ot the MRA before any distribution of property is made.

     

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  25. Should any document be given to employees as regards emoluments drawn and tax withheld?

    Not later than 15th August following an income year, an employer should give to each employee employed by him during that income year a Statement of Emoluments and Tax Deduction. The Statement of Emoluments and Tax Deduction should be in the format as prescribed in the Fourth Schedule to the Income Tax Regulations.

     

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  26. Should the employer file any return with the MRA?

    Every employer is required to submit to the MRA by 15th August of every year, the following:

    1. A Statement reconciling on a monthly basis the total tax withheld in accordance with his payroll during that year with the amount of tax and penalty remitted or credited during that income year.
    2. A Return specifying in respect of every employee whose total emoluments for the preceding income year exceeded Rs 300,000:
      • the full name
      • the National Identity Number
      • the Tax Account Number
      • the particulars of the emoluments and exempt income
      • the amount of exemptions and reliefs claimed in his Employee Deduction Form (EDF)
      • the total amount of tax withheld and remitted to the MRA.

     

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  27. What books and records should be kept by an employer?

    A person deriving income other than emoluments should keep:

    1. keep sufficient books and records in the English or French language to enable his gross income and allowable deductions to be readily ascertained by the MRA;
    2. keep records showing emoluments paid to each employee and tax withheld
      from those emoluments; and
    3. keep the Employee Declaration Forms furnished by his employees.

     

    Every book, record or document should be kept for a period of at least 5 years after the completion of the transaction, act or operation to which it relates.

     

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  28. What is a PAYE audit?

    Officers of the MRA may call on the place of business of any employer to inspect books and records and to ensure that the PAYE system is being correctly applied.  A PAYE audit is a routine check and does not necessarily imply that the MRA suspects any malpractice by an employer.

    Employers are normally notified well in advance of the visit and of the records that should be made available for verification. In case it is found that an employer has committed an offence legal actions may be instituted by the MRA.

     

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  29. What constitutes an offence in relation to PAYE?

    An employer may be prosecuted for any offence committed in relation to PAYE.
    The following constitute an offence in relation to PAYE:

    • failure to register as an employer;
    • failure to pay the amount of tax required to be withheld;
    • failure to pay the amount of tax in arrears required to be deducted;
    • failure to give the Statement of Emoluments and Tax Deduction to an employee.

    On conviction, he is liable to a fine not exceeding Rs 5,000 and to imprisonment for a term not exceeding 6 months.

    The law also makes it an offence for an employer :

    to give a Statement of Emoluments and Tax Deduction which is false or misleading in any material particular; and to disclose, without lawful authority, any information concerning his employee.

    On conviction, he is liable to a fine not exceeding Rs 50,000 and to imprisonment for a term not exceeding 2 years.

     

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  30. How to obtain additional information?

    You may consult the Guide On PAYE and if further information is still required please Contact us on 207 6010

     

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Annex