Budget 2016 – Review of the employment tax incentive

Budget 2016 finalGovernment formally introduced the employment tax incentive into law on 1 January 2014, through the promulgation of the Employment Tax Incentive Act, No 26 of 2013.

The purpose of the employment tax incentive was to reduce the cost to employers of hiring young and inexperienced youth. In other words, the employment tax incentive is essentially a cost-sharing mechanism between the private sector and Government, which operates by reducing the amount of tax that is owed by an employer through the Pay-As-You-Earn (PAYE) system.

It should, however, be noted that the employment tax incentive expires on 31 December 2016 and accordingly, the incentive will cease after 1 January 2017. Therefore, incentive amounts not deducted from PAYE as at 31 December 2016, will be forfeited.

Notwithstanding the aforementioned, SARS has made data on the employment tax incentive available and a review, as to whether to extend the period for which the incentive can be utilised, is currently under way. In the event of any delay in finalising the aforementioned review, Government may consider extending the employment tax incentive by one year.

The outcome of the review will be published and presented to Parliament by the third quarter of 2016.

by Nicole Paulsen

 

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