Proposed Employee Tax Incentive

Draft regulations published lay out the proposed tax incentive to come into effect on 1 January 2014 and is estimated to run for a period of 3 years (until 31 December 2013).

Qualifying employees are defined (specific criteria and exclusions apply) but briefly include the following:

• the employee must have a SA ID document
• be between age of 19 – 29
• employed by the employer on or after 1 October 2013
• earn less than R6 000 per month
• must not be connected to the employer
• does not apply to Domestic workers.

This is to incentivise employers to employ young persons and encourage sustainable employment creation. The employer will benefit for the first 2 years by a reduction of their actual SARS PAYE payments in respect of each qualifying person – see below table. This will not affect the employee in any way and their own tax liabilities due to SARS (IRP5’s are to be issued to them like any normal employee).

The employers have to ensure that they are compliant with all returns and payments to SARS to be eligible for this incentive. Unfair dismissals by employers and non-compliance with sector determinations/bargaining council agreements will cause disqualification for the  incentive and possible penalties of up to 150% of the tax Incentives received in a 12 month-period.