Tax incentive for helping the young gain experience.
It’s an age old problem, you need experience to get a job but you can’t get a job because you’re inexperienced.
Now, government is addressing this conundrum by incentivising companies to hire the less experience.
As of 1 January 2014, a new tax incentive – the Employment Tax Incentive (ETI) – became available to qualifying employers. If you qualify, the ETI offers you an opportunity to hire young and less experienced work seekers while receiving a tax incentive from government.
What does this mean?
The ETI will apply to qualifying employees employed on or after 1 October 2013 by eligible employers. The employer will receive the tax incentive by reducing the amount of Pay-As-You-Earn (PAYE) tax payable to the South African Revenue Service (SARS).
Which in effect means that the first ‘claims’ for the incentive will be submitted with the January 2014 employees’ tax monthly return on or before 7 February 2014.
An employer is eligible for the ETI if the employer:
- is registered for employees tax (i.e. PAYE); and
- is not government or a quasi-government entity.
An employee is a qualifying employee if the employee:
- is between the ages of 18 and 29;
- has a SA ID document or asylum seeker permit;
- is not a connected person to the employer;
- is not a domestic worker;
- was employed on or after 1 October 2013; and
- earns more than a prescribed minimum wage or R2 000 per month where a minimum wage is not prescribed and no more than R6 000 per month.
How does this affect my company?
Your company (if qualified for the ETI) can claim the incentive by decreasing the amount of PAYE that is payable to the SARS for every qualifying employee that is hired by yourself.
This is done by completing the Employment Tax Incentive (ETI) field on the employer’s monthly EMP201 submission to SARS.
It can be claimed for a maximum of 24 monthly periods per qualifying employee.
The incentive should be calculated as follows:
|Year 1||Year 2|
|Monthly Remuneration||Employment Tax Incentive per month during the first 12 months of employment of the qualifying employee||Employment Tax Incentive per month during the next 12 months of employment of the qualifying employee|
|R0 – R2 000||50% of Monthly Remuneration||25% of Monthly Remuneration|
|R2 001 – R4 000||R1 000||R500|
|R4 001 – < R6 000||Formula: R1 000 – (0.5 x (Monthly Remuneration – R4 000))||Formula: R500 – (0.25 x (Monthly Remuneration – R4 000))|
To download and print the SARS leaflet on the ETI click on link below:
SARS E TI Leaflet