Tax and SARS knowledge base
When can an employer use IRP5 source code 3603 with a directive?
When can an employer use source code 3603 or 3653 with a SARS tax directive from the 2026 year of assessment?
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Direct answer
SARS's employee tax-certificate code guide states that, from the 2026 year of assessment, a directive may be issued for source code 3603 or its foreign-service equivalent 3653. The employer must use the code and directive details that match the SARS directive and the actual pension or annuity payment.
Do not add a directive number to ordinary payroll income simply because the validation rules now permit the combination. A valid SARS directive and correct payment classification are required.
What this means in practice
Source code 3603 generally relates to pension or annuity income. The certificate must reflect the directive income source code and directive number in the format required by the reconciliation rules. SARS's employer-reconciliation guidance lists 3603/3653 among the directive source codes available from the 2026 year.
The payroll record, directive and IRP5 or IT3(a) must agree on the taxpayer, accrual or payment, amount, year and source code. A mismatch can reject the certificate, prevent prepopulation on the taxpayer's ITR12 or cause a different assessment result.
Foreign-service equivalents should not be selected merely because the recipient lives outside South Africa. The facts and code definition determine the correct code.
Step-by-step
- Obtain the final SARS directive before completing the employee certificate.
- Confirm the directive belongs to the correct taxpayer and employer or fund.
- Compare the nature of the payment with the source-code description.
- Confirm that the transaction falls in the 2026 or later year for which the combination is permitted.
- Capture the directive number exactly as issued, using the required numeric format.
- Reconcile the gross amount, PAYE withheld and payment dates to payroll and bank records.
- Run the current certificate validation rules before EMP501 submission.
- Resolve any mismatch in the source system and regenerate the file.
- Give the recipient the accepted final IRP5 or IT3(a) certificate.
Documents and records to keep
- SARS tax directive and application reference.
- Pension or annuity payment schedule.
- Payroll or fund-administration record.
- Source-code mapping and validation report.
- EMP501 reconciliation and submission result.
- Final IRP5 or IT3(a).
- Correspondence about corrections or cancellations.
Important limits and exceptions
A directive controls the instructed tax treatment for the payment described in it. It does not cure an incorrect source code, wrong taxpayer or wrong year. Where the payment changes or the directive contains an error, follow the SARS amendment or cancellation process rather than altering the certificate to force a match.
Other directive source codes have separate effective dates and mandatory-number rules. Do not copy the 3603 treatment to lump sums, severance benefits, backdated salary or other pension codes without checking the current guide.
When to get tailored advice
Get help where the directive and payroll code differ, a certificate was rejected, the annuitant is non-resident, the payment covers more than one year, or the ITR12 does not prepopulate correctly.