Employment Tax Incentive ETI

Employment Tax Incentive ETI 2017

So, can Employment Tax Incentive ETI still be claimed after 31 December 2016 and is it still valid in 2017? We have been following up with SARS to ensure we are up to date on this matter at all times. We have been advised that the review process is still in progress. Thus, Employment Tax Incentive ETI is still valid and should be applied in 2017 until further notice.

Employment Tax Incentive (ETI) was implemented with effect from 1 January 2014. Companies have been able to claim ETI for all of their qualifying employees. There have been many questions and uncertainties from various Employers, whereby some don’t completely understand how it gets calculated and this led to certain employers feeling anxious about the effect it might have on their Pay-As-You-Earn (PAYE) and their annual returns in the near future.

To add to this uncertainty, the incentive’s effectiveness was to be reviewed to determine whether to incentive (scheduled to end of 31 December 2016) will continue or not. The Employment Tax Incentive Act, Act No. 26 of 2013 also mentions that the incentive ends on 31 December 2016 – “an employer may not receive the employment tax incentive from 1 January 2017”.

Below is a short summary focusing on the main aspects of ETI followed by the calculations :

Should you have any further questions regarding the above, please feel free to contact us on 021 447 9565 or send us a email on payrollsupport@e2e.co.za and we will give you a call to assist.

What is Employment Tax Incentive ETI:

  • In short, the Employment Tax Incentive (ETI) was implemented to encourage employers to employ “young workers”.

Some of the benefits include :

  • Improving the skills and experience of young South Africans whilst also improving the high unemployment rate in our country.
  • Reducing the employers PAYE amount due to SARS on a monthly basis, with the incentive allowing the employer to reduce the Total Gross PAYE on their EMP201 with the combined ETI total calculated for all qualifying employees.
  • Employers can claim the incentive for all qualifying employees for a 24 month period.
  • Employees’ wages unaffected while the employer can reduce the companies PAYE liability.

Qualifying Employees :

  • Employee has a valid SA ID, Asylum Seeker permit or ID in terms of Refugee Act
  • 18 – 29 years old
  • NOT a domestic worker
  • Employee is not a Connected Person to Employer
  • “A connected person or relative means your spouse or anybody related to you or your spouse by blood in the third degree (e.g. great great grandfather etc.), and any spouse of these persons.”
  • Employed ON or AFTER 1 October 2013
  • Paid a wage of at least R2000 and not more than R6000
  • Where employee was employed for 160 hours in a month

Qualifying Employers :

  • Registered for Employees Tax (PAYE)
  • Is not a municipal entity
  • Is not in national, provincial or local government sphere
  • Not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act
  • Not disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions as may be prescribed by the Minister by regulation.

Employment Tax Incentive ETI Calculations :

Some Employers might have experienced certain ETI errors when submitting their Employer Reconciliation Declaration (EMP501) due to certain validation rules.

It is crucial to ensure that your ETI has been setup correctly on your Payroll software, and that the calculations are accurate and correct. For more information regarding the setup on your Payroll please contact us on the details provided.

Below is a summary on how ETI is calculated based on the different formulas :

  • For the first twelve months of employment :

 

Remuneration Tax % RebateTax Rebate Amount
R0 – R200050%R 0 – R999.9
R2001 – R4000FixedR1000
R4001 – R6000Formula X = A –(B x (C-D)) X = tax rebate A = R1000 B = 0,5 C = Monthly Remuneration D = R4000R 0 – R999.9
  • For the For the second twelve months of employment :

 

RemunerationTax % RebateTax Rebate Amount
R0 – R200025%R 0 – R499.9
R2001 – R4000FixedR500
R4001 – R6000Formula X = A –(B x (C-D)) X = tax rebate A = R500 B = 0,25 C = Monthly Remuneration D = R4000R 0 – R499.9

We would like to ensure all of our clients that we will continuously monitor and provide updates with regards to the review process and possible “cut-off” date in which you are able to still claim ETI.

Regards

Anton

About the Author

Anton Homann – who has written posts on End 2 End Business Solutions.


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