Support for Business – COVID-19 Employment Tax Incentive

Update 3 April:_A resource which may be of use to you is the “Disaster Management Tax Relief FAQ’s_”, created by SARS. Contents of note within this document are:

• An outline of the requirements to be able to claim employee’s tax relief
• An outline of the expansions made to the Employment Tax Incentive (ETI)
• A worked example of how the 20% PAYE tax deferral will work

Please note that there is also information on provisional tax deferral. We regret to inform you that this is beyond our scope of services and so we are not able to assist with this scheme.

Please note: The information provided in this blog is correct at the time of writing, but as this is an unprecedented and ever-changing situation, we will do our best to ensure we keep ourselves and our clients up to date. Please check back regularly for updates – we will also notify you of these by email and system notifications.

Should you have any queries over the content or processes to follow within this blog, please contact our support team via support@simplepay.co.za.

Traditionally, the Employment Tax Incentive (ETI) was intended to promote youth employment, so to address youth unemployment in South Africa. In order to qualify for the standard ETI, certain criteria around employee ages, citizenship and remuneration have to be met. In return for this, in the first 24 months of employment, the employer’s PAYE liability can be reduced. The amount that PAYE liability can be reduced is dependent on the wage bracket that the employee falls within as well as whether it is their first or second year of employment. More info on these requirements is available on our ETI help page.

What are the features of The New COVID-19 ETI Scheme?

Coming into force on 1 April 2020, the COVID-19 ETI scheme will run for 4 months. There are a number of changes which will benefit both those who already qualify under the standard scheme, as well as those that otherwise would not.

Additionally, the frequency of reimbursement payments by the South African Revenue Service (SARS) will be increased from bi-annually to monthly, ensuring that compliant employers retain capital.

Employers already able to claim

Employers who are currently eligible to partake in the scheme, or who are already claiming in either their first or second year, are able to claim an increased reduction in PAYE liability.

For those currently in or going into their first year under the scheme, the maximum amount claimable as a PAYE reduction has increased from R1000 to R1500.

For those currently in or going into their second year, the maximum amount claimable as a monthly PAYE reduction has increased from R500 to R1000.

Employers that would otherwise not be able to participate in ETI

The Government has introduced the following two expansions to the rules for people that can claim over the coming 4 month period. Companies employing individuals falling under this broadened category are entitled to a monthly PAYE liability reduction of R500. The expansions are for:

• Employees aged 18 to 29, for whom the full 24 months of regular ETI have already been claimed.
• Employees aged 30 to 65.

This therefore means that employees between the ages of 18 to 65, who meet all other criteria, qualify for the expanded ETI, benefiting their employers. We would strongly recommend that, if you have any employees whose monthly remuneration is between R2000 and R6500, you explore this opportunity.

Requirements to Partake in the Scheme

In order for employers to qualify for this scheme, they must have been registered for PAYE with SARS on or before 1 March 2020. Any employers who were not registered with SARS at this point should instead look into the applicability of the standard ETI.

It is unclear as to the requirements for payroll software in accommodating how this deduction needs to be recorded. We are anticipating clarification of this point today, 1 April, and we shall provide you with an update of how to claim the sums for qualifying employees on SimplePay before your next payroll submission.

We hope this information aids you in this time of uncertainty, we will continue to do our best to assist you where we can with any queries you may have. Watch this space for new posts on support for the Industrial and Tourism sectors, as well as an extremely useful summary sheet on the various UIF forms, codes and their utility.

Keep well. Stay home. Stay safe.

Team SimplePay

Should you have any queries over the content or processes to follow within this blog, please contact our support team via support@simplepay.co.za.