ETI is a tax concession made to encourage employers to hire young people with no work experience.
The employer may claim the ETI from the South African Revenue Service (SARS) by reducing the amount to be paid over in terms of PAYE by the total ETI calculated on the basis of qualifying employees. This tax concession came into effect on 1 January 2014.
Who qualifies for ETI?
Employers who are registered for PAYE purposes and whose tax affairs are in order, are permitted to claim ETI. If an employer’s tax affairs are not in order ETI may still be claimed, subject to certain restrictions, as soon as the tax requirements are complied with.
Who does not qualify for ETI?
When may ETI be claimed?
Employers may claim ETI if they have workers in their employ who comply with the following requirements:
Note: ETI may be claimed for a maximum of 24 months per qualifying employee.
How is ETI claimed?
An employer can claim by reducing the PAYE payable monthly, by the total ETI as calculated for each qualifying employee. This can be done by completing the ETI field on the monthly EMP201.
There is no limit on the number of qualifying employees that may be hired.
Note: Employers must be able to produce the identity documents of the employees that ETI is claimed for, if requested to do so by SARS.
How is ETI calculated?
Employers must carry out the following steps each month:
The ETI is calculated as follows:
If a worker was employed for only part of the month, calculations must be adjusted accordingly.
Note: If the value of the ETI is more than the PAYE liability of the entity for a specific month or if the employer is not able to claim for a specific month, the ETI is carried over to the next month.
What fines are applicable?
Fines will be imposed should, inter alia:
The foregoing is only a limited summary for information. Consult your financial adviser for more details.