Following the state of disaster address, there have been multiple amendments to the Disaster management tax Relief measures.
PSIber has been keeping abreast of all these changes and have spent countless hours interpreting and developing these changes to assist our clients during these times
A summary of ETI changes over the last few months.
The first round of changes:
To minimize the loss of jobs during this critical period, the Government proposes expanding the ETI program for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 as follows:
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Increasing the maximum amount of ETI claimable during these four months for employees eligible under the current ETI Act from R1000 to R1500 in the first qualifying twelve months and from R500 to R1000 in the second twelve qualifying months.
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Allowing a monthly ETI claim in the amount of R500 during these four months for employees from the ages of:
18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for 24 months; and
30 to 65 who are not eligible for the ETI due to their age.
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Accelerating the payment of employment tax incentive reimbursements from twice a year to monthly as a means of getting cash into the hands of tax-compliant employers as soon as possible.
This expansion will, however, only apply to employers that were registered with SARS as of 1 March 2020. Further to the above, the current compliance requirements for employers under sections8 and 10(4) of the ETI Act will continue to apply.
The second round of changes:
Employment tax incentive
The employment tax incentive (ETI) may only be claimed by companies registered with the South African Revenue Service (Sars) as of March 1 and that have an annual turnover of less than R50 million.
First-year of employment
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Where monthly remuneration is less than R2 000, the ETI increases to R500 plus 50% of the monthly remuneration; the maximum amount that can be claimed is R1 500.
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For monthly remuneration between R2 000 and R4 500, the ETI increases to R1 500.
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For monthly remuneration between R4 000 and R6 000, the ETI is determined following the formula X = A-B x (C-D), where A represents R1 500, B represents 0.75, C represents the monthly remuneration of the employee, and D represents R4 000.
Employment between 13 and 24 months
Applicable only to those receiving remuneration equal to R6 000 per month or less, the incentive that may be claimed is as follows:
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Where the monthly remuneration is less than R2 000, the ETI is the sum of R500 plus 25% of the monthly remuneration.
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For monthly remuneration between R2 000 and R4 500, the ETI is R1 000.
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For monthly remuneration between R4 000 and R6 000, the ETI is determined following the formula X = A-B x (C-D), where A represents R1 000, B represents 0.5, C represents the monthly remuneration of the employee, and D represents R4 000.
After the first 24 months
A new subsection has been inserted, providing for qualifying employees who have already been employed for 24 months by the same employer and receive remuneration equal to R6 500 per month or less. The incentive applies to employees aged 18 to 29; employees aged 30 to 65; employees employed in a fixed place of business located within a special economic zone; and those employed in an industry designated by the minister of finance.
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For qualifying employees earning less than R4 500 per month, the ETI is R500.
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For qualifying employees earning between R4 500 and R6 500, the ETI is determined following the formula X = A-B x (C-D), where A represents R500, B represents 0,25, C represents the monthly remuneration of the employee and D represents R4 500.
The third round of changes:
Employees who are in the first qualifying cycle for ETI:
- For May, June, and July the remuneration gross-up requirement has been removed for all age groups if the hours are less than 160.
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In the case of the hours being less than 160 in the month, the ETI amount calculated in respect of the normal age groups must still be grossed down, even though the remuneration was not grossed up, while ETI for the two extended age groups is not grossed down. This applies to April, May, June, and July
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In all cases, the actual remuneration paid in the month is used to check against the R6,500pm remuneration qualifying threshold and used to calculate the ETI if the employee qualifies
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For April, May, June, and July, the following has been deleted:
The default of a minimum wage or R2 000pm if there is no wage regulating measure.
- For April, May, June, and July, the qualifying requirement that the employee’s start date of employment must be on or after 1 October 2013 has been removed.
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The proposed increase of the ETI value from R500 to R750 for all age groups, as published in the draft Bill of 1 April 2020, remains the same. This applies to all age groups. It is proposed by National Treasury that the additional R250 not claimed as part
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of the April payroll run can be claimed during the May payroll run. Note: The effective date of this proposed change is retrospective to 1 April 2020
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SARS will refund the portion of the ETI that exceeds the PAYE liability stated on the EMP201 monthly for the months April to July.
The fourth round of changes:
To be applied and/or recalculated from 1 April to 31 July 2020:
The original age group of 18-29 who were not eligible for the ETI because they were employed before 1 October 2013:
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The employment start date of 1 October 2013 is no longer applicable.
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The ETI value must be grossed down if there are fewer than 160 employed and remunerated hours.
The original age group of 18-29 who were not eligible for the ETI because they had already qualified for 24 months:
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The employment start date of 1 October 2013 is no longer applicable.
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The ETI value must be grossed down if there are fewer than 160 employed and remunerated hours.
The added age group of 30-65 who were not eligible for the ETI due to their age and/or were employed before 1 October 2013.
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The employment start date of 1 October 2013 is no longer applicable.
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The ETI value must be grossed down if there are fewer than 160 employed and remunerated hours.
In summary, It is necessary to retrospectively correct ETI based on the fourth round of changes implemented
Please note: Should the recalculation result in a positive the amount can be claimed in the current interval, however, if the amounts result in a negative the EMP201 for that month should be amended.
Example of recalculation and results:
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