Why is there an Employment Tax Incentive?
What is it?
This incentive will complement existing government programmes with similar objectives.
ETI was implemented with effect from 1 January 2014.
- The employer is eligible to receive the ETI if the employer–
- Is registered for employees’ tax (PAYE);
- Is not in the national, provincial or local sphere of government;
- Is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette);
- Is not a municipal entity;
- Is not disqualified by the Minister of Finance due to displacement of an employee or by not meeting such conditions as may be prescribed by the Minister by regulation.
- An individual is a qualifying employee if he or she–
- has a valid South African ID;
- is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance;
- is not a domestic worker;
- is not a “connected person” to the employer;
- was employed by the employer or an associated person to the employer on or after 1 October 2013; and
- is not an employee in respect of whom an employer is disqualified to receive the ETI (i.e. the employee is paid below the minimum wage applicable to that employer or paid a wage below R2 000 per month if a minimum wage not applicable).
How does it work?
- Identify all qualifying employees in respect of that month
- Determine the applicable employment period for each qualifying employee
- Determine each employee’s “monthly remuneration”
- The EMP201 form was amended to include a field for claiming ETI, click here to see a prototype of the new form.
- Calculate the amount of the incentive per qualifying employee as per the table below.
|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?|
|R 0 – R2 000 ?||?50% of Monthly Remuneration||?25% of Monthly Remuneration|
|R 2 001 – R4 000 ?||?R1 000||?R500|
|R 4 001 – R6 000 ?||
R1 000 – (0.5 x (Monthly Remuneration – R4 000)) ?
R500 – (0.25 x (Monthly Remuneration – R4 000))
In determining the first or the second 12-month period, only the months in which the employee was a qualifying employee are taken into account. For example, the employee may be a qualifying employee in the first three months but not a qualifying employee in the fourth and the fifth months. If the employee is a qualifying employee in the sixth month, the sixth month is month number four as far as the 12-month period is concerned.