SARS Updated Lump Sum Directive Guide
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SARS has released an updated Guide to Complete the Lump sum Tax Directive Application Forms to help taxpayers and tax practitioners correctly complete Lump Sum Tax Directive applications, especially when dealing with retirement, retrenchment, or severance payouts. The new guide clarifies which form to use, what supporting documents are required, and how to ensure submissions are compliant from the start.
What is a Lump Sum Tax Directive?
A tax directive is a formal instruction from SARS telling the fund or employer how much tax to deduct before paying out a lump sum. It applies to:
Retirement, death, or withdrawal benefits
Severance packages, divorce settlements, or employee share schemes
Transfers between funds (e.g. preservation to retirement annuity).
Key Updates and What’s New
Clear Guide for Choosing the Correct Form
SARS now clearly distinguishes between directive application forms (e.g. Form B, Form C, Form E) based on the reason for the lump sum. For example:
📝 Use Form B for withdrawals, retrenchments, or divorce-related payouts from pension or provident funds,
📝Form C for retirement or emigration withdrawals from a retirement annuity fund (RAF), or
📝Form E for post-retirement payouts, such as living annuity commutations or death benefits after retirement.
Checklist of Required Documents
The updated guide includes specific documents needed per directive type, such as:
ID documents or passports
Retirement fund letters
Divorce orders
Employer letters for retrenchment or severance.
Submitting incomplete applications is one of the top reasons directives are rejected.
How to Apply
Applications can be submitted:
Directly by the fund or employer via eFiling,
Or through a tax practitioner with the correct mandate.
The applicant must be tax-compliant, with updated bank details and tax returns.
Special Cases Clarified
The guide now provides clear instruction for:
Emigrants withdrawing funds
Divorced spouses accessing pension split
Late estate lump sums
Employee share option payouts.
Turnaround Time
SARS aims to finalise compliant applications within 21 business days, but delays are common when:
Supporting documents are missing - remember that the 21 days will restart once you submit additional documents.
Fund names are incorrect
Or applicant details don’t match SARS records.
Tips to Avoid Delays
Use the correct directive form for your situation.
Ensure all supporting documents (ID, letters from funds, divorce orders, etc.) are included.
Make sure the taxpayer’s returns and eFiling profile are up to date.
Check that the fund or employer has submitted an IT3(a) or IRP5 where required.
Read more details on how to get a directive on the SARS website.
