An Introduction to Pay As You Earn (PAYE)

Pay As You Earn (PAYE)

Pay-As-You-Earn (PAYE) is a withholding mechanism through which taxes are collected from employment income. Employers having employees must register with FRCS for PAYE from the date of employment of the first employee. Once registered, employers must submit a withholding summary. All Periodic Summaries must be filed by the last day of the month following the end of the filing period and appropriate payments made to FRCS. PAYE is legislated under the Tax Administration Act 2009.

This issue highlights on the transformation of PAYE EMS reporting to Payday Reporting on the FRCS Tax Portal Online Service (TPOS).

Please note that Payday reporting has gone live on TPOS from  February 1st 2021.

Hence, please take note of the following on the administration of Payday Reporting:

  • Payday filing is a new requirement which will be filed in TPOS based on the pay frequency of the pay cycles either monthly, fortnightly, bi-monthly or weekly. Employers will be required to upload the Pay Day files in TPOS as soon as their employees have been paid out.
  • The specifications and format of Pay Day files are entirely different compared to the Employer Monthly Summary (EMS) and the file formats and structures have been provided to Payroll Vendors.

What is payday filing?

  • Payday Reporting/Filing is what the name depicts itself, which is reporting the pay details every payday. Automatic calculation of tax liability by the system is expected to minimize tax computation errors, increases consistency, and provides assurance to employers that their employees’ tax liability is being computed correctly.
  • The success of this approach, however, relies on the employer to correctly break down each employee’s pay into the correct classifications and to populate them correctly on the return.

How will the payroll process change?

  • The payroll process remains the same but the reporting format to FRCS will change. Employers should review their current process to ensure payday reporting does not become an extra step but saves steps in the overall process.

Overview of the TPOS payday reporting process

  • On TPOS, the employer will be required to create “Payment Periods” by entering the period start date, period end date, date on which the wages was paid and the payment frequency.
  • The employer has to then upload the Payday for all payment periods falling within the filing period. The Payday will be validated for TINs, date of birth, employment start date, employment end date and special payments approval numbers.

Therefore, if you require our service  on the Payday reporting, NTIS queries or on any other tax matter then please contact us on  [email protected] and we will attend to your request.

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