THE South African Institute of Tax Pro­ fessionals (SAIT) recently made submis­ sions to the South African Revenue Ser­ vice (SARS) regarding the tax treatment of amounts received in consequence of voluntary retrenchments. SAIT has received clarification that voluntary severance packages qualify as severance benefits. The submissions were made in re­ sponse to the recently published Com­ pletion Guide for IRP3(a) and IRP3(s) Forms (SARS Completion Guide). The SARS Completion Guide assists employers in submitting tax directives on, among others, the retrenchment of employees. The SARS Completion Guide appears to adopt the view that only in­ voluntary severance payments qualify for the preferential tax treatment of “sever­ ance benefits” and not voluntary sever­ ance packages. If an employee agrees to a voluntary severance package and the employer elects “severance benefits — voluntary retrenchment” on the IRP3(a) form, the application is currently processed by SARS according to the normal tax ta­ bles, and not the favourable tax table for severance benefits. Voluntary and involuntary retrench­ ments are usually a result of a general reduction of staff, reduction of staff in a particular class or the employer ceasing or planning to cease trading. In most cases, individuals being re­ trenched also do not hold more than five percent of the shares or members’ interest in the employer company. We thus agree with the submission that a voluntary severance package usually meets all the requirements for a sever­ ance benefit in terms of the Income Tax Act 58 of 1962 (the act), and should ac­