Employment Tax Incentive Term Extended

The Employment Tax Incentive Act 26 of 2013 (the Act), was promulgated on 18 December 2013 and came into effect on 1 January 2014.

The Incentive Plan has recently been extended for an additional 10 years to 29 February 2029.

Qualifying employees are between the ages of 18 and 29 and earn less than R6 500 per month.

As from 1 August 2018, employers are able to claim ETI in respect of Special Economic Zones “SEZ” qualifying employees. This is as a result of the broadening of the ETI from a “youth employment incentive”, to also apply as an additional incentive for Special Economic Zones (SEZs).

On 6 July 2018, the Minister of Finance published Gazette No. 41759, designating six SEZs for the purposes of section 6(ii) of the Employment Tax Incentive Act, No. 23 of 2016 (the ETI Act). A number of requirements must be met before an employee will be considered to be a qualifying employee for purposes of the ETI Act. Where the age requirement is not met, the SEZ requirement states in section 6(a)(ii), that the employee must be employed by an employer operating through a fixed place of business located within a designated SEZ, and that employee renders services to that employer mainly within that SEZ.

With effect from 1 January 2019, the new National Minimum Wage (NMW) requires employers to remunerate employees at a minimum of R20 per hour.

As from 1 March 2019, employers are able to claim the maximum value of R1 000 per month for employees earning up to R4 500 monthly (previously R4 000), with the incentive tapering to zero at the maximum monthly income of R6 500. The value of the incentive halves during the second twelve-month period where an employer claims the ETI in respect of a specific employee.

From 1 March 2019 revised Monthly Remuneration amounts/categories came into effect.

The ETI operates in conjunction with Skills Development Levy (SDL) claims, the section 12H tax incentive, and the Youth Employment Service (Y.E.S).

The ETI is limited to 24 months per qualifying employee.

ETI claims are predominantly facilitated as part of the employees’ tax reporting process, wherein employers utilise the ETI that they claim, by setting it off against the employees’ tax payable.

SARS issued a Guide to the Employment Tax Incentive (Issue 2), dated 4 June 2018 and may be accessed via this link: Guide.

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