Employee Tax Incentive Scheme – Are you taking advantage of this tax break?
We have recently identified that a large number of our clients and companies closely associated with them, have not been calculating and claiming their ETI. In some cases, this has resulted in a significant loss of tax free income and an overpayment of PAYE.
What is it?
The Employment Tax Incentive (ETI) is an incentive mainly aimed at encouraging employers to hire young and less experienced work seekers. It will reduce the cost to employers of hiring young people through a cost-sharing mechanism with government.
- The employer is eligible to receive the ETI if the employer–
- is registered for employees’ tax (PAYE) and is tax compliant with SARS in all aspects;
- is not in the national, provincial or local sphere of government;
- is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette);
- is not a municipal entity;
- is not disqualified by the Minister of Finance due to displacement of an employee or by not meeting such conditions as may be prescribed by the Minister by regulation.
- an individual is a qualifying employee if he or she–
- has a valid South African ID;
- is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance;
- is not a domestic worker;
- is not a “connected person” to the employer;
- was employed by the employer or an associated person to the employer on or after 1 October 2013; and
- is not an employee in respect of whom an employer is disqualified to receive the ETI (i.e. the employee is paid below the minimum wage applicable to that employer or paid a wage below R2 000 per month if a minimum wage not applicable).
Top Tip: There is no limit to the number of qualifying employees that an employer can hire.
How does it work?
Employer will calculate and claim the incentive on a monthly basis. No additional registration required – just claim it on your monthly EMP201 upon submission of your other PAYE/SDL/UIF.
Our payroll systems provide accurate monthly payslips and reports required for the monthly/annual statutory returns (EMP201 and WCA/OID), along with electronic IRP5s at the end of the tax year for your employees – no manual calculations required and saving you precious time!
How long will it be available?
The incentive is currently scheduled to end on 31 December 2016 – so don’t lose out if you are eligible!
Should you need guidance to rectify prior periods as well as limiting the risk of a PAYE audit, please do not hesitate to contact Juanita Roman in our Tax Department.