Employment Tax Incentive and Special Economic Zones

This article looks at the practicalities of ETI as it relates to clients of HRTorQue and then looks at the practical implementation of ETI as it relates to SEZs.

A number of employers have not yet taken advantage of the Employment Tax Incentives “(ETI)” initiative on offer by SARS. There are a number of challenges and risks around activating this incentive, but if managed properly significant, real benefits can flow to the employer.

The Employment Tax Incentives (ETI) was designed to encourage employment of young individuals and is a valuable tool for employers to recover funds from the state. It has been extended a few times already and we have recently heard it has been extended further (to be confirmed).

If you are a client of HRTorQue’s and you have activated ETI you should be aware of the following:

  • If you do choose to have ETI activated, you will receive a monthly report with your test reports showing who the current calculation on your payroll. It is very important that you note that you can only claim ETI for your organisation if you are currently in good standing with SARS, in all your tax types.
  • We cannot access your current standing with SARS, this can only be done by the person that holds the efiling “Income Tax” profile. We only have access to the PAYE profile in most circumstances, so we are completely in your hands when it comes to knowing if you are in good standing.
    If you are currently NOT in good standing with SARS, you must tell your payroll team to remove the ETI from your payroll before you run live, for the current month payroll. Your payroll team will then move the ETI calculated for the current month to a “calculated but Unclaimed status” for our payroll administration team to reserve these funds with SARS via the EMP201 submission for future use, if possible, within the relevant tax seasonal time frames, (as explained on the refund document below).

It is important to note that it is extremely difficult and a significant risk to your organisation to attempt to withdraw the ETI post submission and payment to SARS. Please make note of this important issue and help us keep you safe in this regard.

Here is a link from SARS that explains how to claim, post the current period, if you are not in good standing, and the process that is followed.

The 1st August 2018 brought us more changes in this process as SARS finally gazetted the Special Economic Zones for ETI.

Designated Special Economic Zones and ETI Act

On 6 July 2018, the Minister of Finance published Gazette No 41759 designating six Special Economic Zones (SEZ’s) for the purposes of section 6 (ii) of the employment Tax Incentive Act, No-26 of 2013 (the ETI Act).

With effect from 1st August 2018 and for the purpose of the ETI act the 6 designated zones are:
1. Coega (PE AREA)
2. Dube Transport (KZN)
3. Industrial Development Zone (East London)
4. Maluti-a-Phofung (Bethlehem area)
5. Richards Bay (KZN)
6. Saldanha Bay (Western Cape)

Boundaries and other details of these SEZ’s can be found in Gazette number 41758.

One of the criteria that must be satisfied before an employee can qualify to generate an employment tax incentive for the employer is that the employee must be not less than 18 years old and not more than 29 years old at the end of the claiming month.

However, section 6(a) (ii) of the Employment Tax Incentive Act provides as follows: “6. Qualifying employees. – An employee is a qualifying employee if the employee –

(a) (ii) is employed by an employer operating through a fixed place of business located within a special economic zone designated by notice by the Minister of Finance in the Gazette and that employee renders services to that employer mainly within that special economic zone; or”

The age requirement for ETI therefore does not apply where:

  1. The employee provides services mainly to an employer in a designated SEZ, and
  2. The employer operates through a fixed place of business located within that SEZ.

Fixed Place of Business

The six SEZ’s designated by the Minister of Finance have clearly defined boundaries, to comply with the first requirement, the employer must operate through a fixed place of business located within the defined boundaries of the SEZ.

If the employer has branch offices, the employer satisfies the first requirement if one or more of the branch offices operate through a fixed place of business within one or more of the six designated SEZ’s. A branch office is not a separate legal entity from the business under which it operates, therefore it is irrelevant whether the branch office or the business is regarded as the employer for purposes of section 6 (a) (ii), as both form part of one legal entity.

Note that an employee’s residential home will not constitute a fixed place of business for the purpose of section 6(a) (ii) of the ETI Act.

Rendering of Services Mainly within an SEZ

The word “mainly” in the income Tax Act means ‘more than 50%’, and this principle is applied to section 6 (a) (ii) of the ETI Act. This would be measured per month (ETI is administered on a monthly basis). Secondly, the employee must render more that 50% of his or her services per month physically within a designated SEZ where the employer has a fixed place of business (as discussed above).

Application of the Section 6(a) (ii) Requirements

In practical terms, the following three criteria must be met by an eligible employer in order to satisfy the requirements of section 6(a) (ii):

  1. The employer must operate through a fixed place of business, and
  2. The fixed place of business must fall within a designated SEZ, and
  3. The employee must render services to the employer mainly with that SEZ

The result is that the ETI claimed under section 6(a) (ii) is ultimately ‘ring fenced’ to the employees rendering services mainly within that designated SEZ.

The same principles apply if the branch office is registered separately for PAYE from the business.

Tax Certificate Codes for SEZ’s

While the Government Gazette that designated the six SEZ’s was published on 6 July 2018, the effective date is 1 August 2018. Employees who qualify in terms of section 6(a)(ii) in the month of August 2018 must be reported on tax certificate for the August 2018 mid-year tax certificate submissions.

What do you do if you want to claim ETI?

HRTorQue has considerable experience in managing ETI calculations and applications. We are experts at reducing client stress by managing these types of administrative tasks on their behalf.

For the maximum benefit in relation to claiming ETI, we recommend contacting your payroll team leader who will guide you through the process.

Directives and Severance Benefits

In simple terms, and dealing with employees only, a “severance benefit” is defined in the Income Tax Act as a payment of a lump sum by an employer (i.e. not paid by a retirement fund or from the proceeds of an insurance policy) to an employee in respect of the relinquishment, termination, loss, or variation of the employee’s employment under circumstances where:

  1. The employer is 55 years of age or older
  2. The employee cannot continue working due to sickness, accident, injury or incapacity through infirmity of mind or body
  3. The employer discontinues the trade in which the employee was employed or makes the employee redundant by reducing staff.

Severance benefits are also described as ‘Voluntary Severance Packages’.

Taxation Rules

Severance benefits are taxed using the same tax table as used for retirement fund lump sums.

Table: Retirement Fund Lump Sum Table (including Severance Benefits):

Taxable Income Percentages and Brackets
0 – 500 000 R 0 + 0% of each R1
500 001 – 700 000 R 0 + 18% of the amount above R500 000
700 001 – 1 050 000 R 36 000 + 27% of the amount above R 700 000
1 050 001 and above R 130 500 + 36% of the amount above R 1050 000

This table must be applied on a cumulative basis by taking into account severance benefits and any retirement fund lump sums paid previously. Payrolls cannot apply this table because the payroll does not have a record of these prior lump amounts paid to the employee.

Only SARS have the records to be able to apply this table correctly and employers must apply for a tax directive from SARS to be able to withhold the correct employees’ tax amount.

Directive Rules – IRP3 (a)

SARS have confirmed the following directive application procedures for the taxation of a payment by an employer of a severance benefit.

Prior to September 2017, when an employer selected “Severance Benefit – Voluntary Retrenchment” on the IT3 (a) directive application, the normal income tax table was incorrectly used to determine the employees’ tax to be withheld from severance benefit lump sums. This was corrected by the final income tax calculation on assessment where the severance benefit tax table is used for severance benefits reported as code 3901 on the tax certificate.

From September 2017, the Tax Directive system was amended and the severance benefit tax table is now used to determine the employees’ tax amount stated on the tax directive if the reason “Severance Benefit – Voluntary Retrenchment” is selected.

If the employer used the reason “Other” and in the description field entered ‘Voluntary retrenchment’ instead of using the correct box (historically we saw people doing this because they were worried that under the old practice they would not get the R500,000 exemption), these directives must be cancelled and resubmitted with the reason “Severance Benefit – Voluntary Retrenchment” to ensure that the assessment calculation is correct.

The following ‘Reason’ options can be selected on the IRP3 (a) directive application form:
1. Severance benefit – Death
2. Severance benefit – Retirement (age of 55 or older)
3. Severance benefit – Retirement due to ill health
4. Severance benefit – Involuntary retrenchment
5. Severance benefit – Voluntary retrenchment

Tax Certificates

The following codes must be used to report the severance benefit amount and its related employees’ tax amount on tax certificates:

  • Code 3901 (Gratuities / Severance Benefits (PAYE))
  • Code 4115 (Tax on retirement lump sums and severance benefits).

Note:
If the employer has incorrectly used code 3907 for the severance benefit the amount will be treated as normal income and taxed using the income tax table on assessment without the R500 000 exemption allowed by the severance benefit tax table.

The employees’ tax withheld in accordance with the directive must be reported on the tax certificate as code 4115 and not as normal PAYE (code 4102).

Personal Income Tax Filing – HRTorQue Tax Team

The tax filing season officially starts on 1 July 2018 for the 2018 tax year (1 March 2017 to 28 February 2018). The closing date for e-filing submissions will be the end of October 2018 for normal taxpayers and the end of January 2019 for provisional taxpayers.

Pricing:

Our charges for completing tax returns will depend on when we receive your information. Premium pricing will kick in for last minute returns to try and avoid the challenges we face every year.

Information Received By Cost of Return incl. VAT
15 October 2018
(15 December for provisional taxpayers)
R810.00
Later than 15 October 2018
(later than 15 December for provisional taxpayers)
R1,625.00

Please Note: We reserve the right to charge a surcharge on the completion of tax returns that require the drafting of additional schedules.

The cost of completing these tax returns will include the following services:

  • Collection and collation of supporting documentation necessary to complete your tax return
  • Completion and filing of the tax return
  • Checking of assessment and notifying you of the result thereof
  • Submitting any additional information requested by SARS via e-Filing. (Note this is SARS’ first request for information and additional charges will apply where further information is required, or a dispute is necessary.)
  • Further charges will apply where SARS first query extends to additional queries, and possibly an audit. Fees will be billed at an hourly consulting rate of R750 plus VAT or part thereof. This approach is necessary due to the ever-increasing queries made by SARS. These extended queries require further collation of the necessary documentation and hence our fee covers our time spent. Should you wish to take up the issue personally we will forward you all the necessary supporting documentation to do so.

Process:

Due to the volume of work anticipated during this filing season and the need to maintain the high standards required by the South African Institute of Tax Professionals I will once again be assisted this year by a broader team, so please don’t be surprised if you receive correspondence from Erin, Gina or Megan.

Returns that are submitted via e-Filing are generally assessed within a couple of minutes and the assessment will be forwarded to you in cases where payments to SARS need to be made. If you are due a refund, please keep an eye on your bank account and notify me if you have not received it within 30 days. Due to the volume of returns submitted it is not possible to monitor the progress of each refund payment. SARS no longer sends out notifications where they experience bank account problems; and due to Call Centre congestion and the risk of fraud they are loathe to assist with refund verifications.

If you have all the necessary documentation to complete your tax return and would like to be one of the ‘early birds’, please can you get this information through to me as soon as possible and the work will be processed on a first come, first served basis.

Provided you are on my e-Filing profile we will endeavour to lodge your return within 72 hours. For new clients your details will need to be loaded onto my e-Filing profile. Once loaded into e-Filing it takes approximately 48 hours for the profile to be activated. Please note that the information that you provide in this regard must be exactly that which is reflected on e-Filing, otherwise the request will be rejected.

In the event of SARS making an error on the assessment the tax return completion fee includes a maximum of 30 minutes consulting with SARS on your behalf. Any interventions that exceed this period will be billed at an hourly consulting rate of R750 plus VAT or part thereof. This approach is necessary due to the ever-increasing errors made by SARS. Should you wish to take up the issue personally we will forward you all the necessary supporting documentation to do so.

Information Requirements:

To complete your tax return accurately and timeously we require the following information:
PLEASE NOTE ALL DOCUMENTATION TO BE SENT TO [email protected]

  • IRP5 certificate/s (Please request a copy from your employer so that we can verify that the IRP5 agrees to the IRP5 on the pre-populated tax return)
  • IT 3(a)’s relating to untaxed income, IT 3(b)’s for interest and dividends and IT 3(c)’s for any capital gains received
  • Sale of any capital assets
  • Details of any other income that you may have received from any sources (e.g. if earning rental income, we would need the total income earned in the year and a schedule of the expenses incurred in generating the rental income (i.e. interest paid on bond, levies, management fees, repairs and maintenance, electricity / lights and water etc.)
  • Medical aid tax certificate
  • Retirement annuity tax certificate
  • Travel Details: Opening and closing mileage, business / private km’s, total km’s travelled, car make and model and original cash purchase price. You are required to maintain a detailed logbook if you want to claim business mileage against your travel allowance. This detail includes the clear separation of the business and private mileage undertaken and the listing of the clients visited daily. Please email this logbook to me.
  • Should you have use of a company car please note that you are required to maintain a detailed logbook. In the event of a SARS review / audit this detailed logbook will need to be sent to them. Please email this logbook to me.
  • If you earn mainly commission (more than 50% of total remuneration) then we require a schedule listing the expenses that you incurred during the tax year to earn that commission. Please retain the supporting documentation for 5 years as SARS may audit you at any time.

If any of the details listed below have changed please notify me so that we can make the necessary changes on the tax return:

  • Marital status (kindly advise if you are married in / out of community of property). If you are married in community of property and receive investment or rental income in addition to your salary, please send through your spouse’s name and ID number.
  • Residential and postal address
  • Telephone / cell phone numbers / email address
  • Bank Details: Account number / holder, branch code and type of account (very important). If these details change, you will be required to take a certified copy of your ID, proof of residence and original current bank statement (with bank stamp on it) to your nearest SARS office in person. SARS requires you to do this in person due to recent occurrences of fraud.

Should you have any questions regarding this process please do not hesitate to contact the team on [email protected].

Exemption from Income Tax on Foreign Employment Income

With more and more companies opening operations in Africa and around the world it is imperative that they are au-fait with the Employees Tax legislation on sending employees off-shore. SARS Interpretation Note 16 (issue 2) was published on 2 February 2017 to provide an explanation of the legislation and particularly the requirements that need to be met for the employee to qualify for the applicable exemption. All employers are requested to read the legislation to ensure that they are familiar with the qualifying criteria as SARS clearly places the onus on the employer to make the correct interpretation of any particular deployment / transfer.

In order to qualify for the exemption, a taxpayer must:

  • earn certain types of remuneration (remuneration earned for services rendered);
  • in respect of services rendered by way of employment (there must be an employment relationship and an employment contract);
  • outside the Republic (the landmass of SA and its territorial waters – 22.2 km);
  • during specified qualifying periods (for a period or periods exceeding 183 full days in aggregate during any period of 12 months, a person must also have rendered services outside the Republic for a continuous period exceeding 60 full days in the same period of 12 months); and
  • not be subject to an exclusion (holding of public office).

In summary, and to ensure that employers are fully aware of their obligations in these situations, it is important to confirm the following.

An employer that is satisfied that the provisions of section 10(1)(o)(ii) will apply in a particular case may elect not to deduct employees’ tax in a particular case. In the case where the exemption was not applicable, the employer will be liable for the employees’ tax not deducted as well as the concomitant penalties and interest. It is the employer that bears this risk and it is therefore very important that they ensure that the circumstances of each case are carefully evaluated and that the correct tax treatment is applied.

Should you have any doubts regarding the interpretation process or require assistance working through this evaluation please do not hesitate to contact Dave Beattie on [email protected] or 031 582 7410.

Value Added Tax Change – Things to Consider

VAT will be levied at the standard rate of 15% on the supply of goods and services by registered vendors post the April 2018 (The tax rate was 14% until 31 March 2018).

A vendor making taxable supplies of more than R1 million per annum must register for VAT. A vendor making taxable supplies of more than R50 000 but not more than R1 million per annum may apply for voluntary registration. Certain supplies are subject to a zero rate or are exempt from VAT.

The following are important considerations for the change of VAT rate:

Transaction Date – the VAT rate to apply depends on the time of supply rules. In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when:
an invoice is issued; or
payment is received.

For most transactions the general time of supply rule will apply. However, some transactions have special time of supply rules. Some examples include supplies between connected persons, fixed property transactions and supplies made under instalment credit agreements. In addition, some rate specific rules could apply when there is a change in the VAT rate. Most transactions which occur on or after 1 April 2018 will be subject to VAT at the new rate of 15% unless a special time of supply rule or a rate specific rule applies.

Prices Quoted or Advertised
All prices advertised or quoted by vendors for taxable supplies must include VAT at the standard rate (unless the supply is zero-rated). Post 1/4/2018 advertised prices must show 15% VAT although the Commissioner for SARS has granted permission under proviso (iii) in section 65 of the VAT Act for a vendor to display a notice that the price does not include VAT at the new rate of 15% and prices will be adjusted at the point of payment.

Agreements
Check agreements you have with suppliers/customers to see whether the agreements contain clauses restricting any change in VAT or impacting the timing of supply of goods and/or services.

Sales and Billing, Debit and Credit Notes
You need to make sure any invoices, receipts, bills reflect VAT at the correct rate of 15% after the 1/4/18 to avoid any disputes with customers or suppliers. Similarly debit/credit notes issues should reflect the VAT rate of the underlying sale or purchase.

Importation of Goods
Registered importers or clearing agents must take care that the customs declarations reflect the new VAT rate of 15% in respect of goods entered for home consumption on or after 1 April 2018.

VAT201 Returns
Care must be taken to make sure the correct rate of VAT is reflected for each period of the VAT201 return which straddles the 1/4/2018.

Rate Specific Rules

There are some specific rules for supplies straddling the 1/4/2018. For example:

Supplies starting before and ending on or after 1 April 2018:
Where goods are delivered or services are performed during a period commencing before 1 April 2018 and ending on or after 1 April 2018, the VAT-exclusive price of the supply must be apportioned on a fair and reasonable basis and allocated to the respective periods. The VAT rate is then applied accordingly. That is, the rate of 14% is applied to the value of supplies before 1 April 2018 and the rate of 15% is applied to the value of supplies from 1 April 2018 onwards. This rule does not apply if the time of supply is triggered before 1 April 2018.

This rate specific rule applies to:

  • goods supplied under rental agreements
  • goods supplied progressively or periodically
  • goods or services supplied in construction activities; and
  • services rendered over the period concerned,
    but does not apply to supplies of fixed property (including residential fixed property).

Goods delivered or services actually performed on or after 1 April 2018 where the time of supply is triggered between 21 February 2018 and 31 March 2018:
Rate specific rules also apply where the time of supply occurs between 21 February and 31 March 2018 (that is, on or after the date of the announcement of the increased VAT rate, but before the effective date of the increased rate). Under this rule, when goods are delivered on or after 23 April 2018, or services are performed on or after 1 April 2018, but the time of supply is triggered between 21 February and 31 March 2018 as a result of any invoicing or payment in relation to the supply, then VAT at the rate of 15% applies. However, if the goods are delivered before 23 April 2018 (that is, within 21 days after 1 April 2018), or the services are rendered before 1 April 2018, then the supplies concerned will be subject to VAT at 14%.

Further information is available here.

Income Tax Rates and Thresholds 2018/19

Tax rates for the period 1 March 2018 to 28 February 2019 for individuals and special trusts:

Taxable Income (R) Rate of Tax (R)
0 – 195 850 18% of taxable income
195 851 – 305 850 35 253 + 26% of taxable income above 195 850
305 851 – 423 300 63 853 + 31% of taxable income above 305 850
423 301 – 555 600 100 263 + 36% of taxable income above 423 300
555 601 – 708 310 147 891 + 39% of taxable income above 555 600
708 311 – 1 500 000 207 448 + 41% of taxable income above 708 310
1 500 001 and above 532 041 + 45% of taxable income above 1 500 000

Trusts other than special trusts: rate of tax 45%

Rebates

Primary R14,067
Secondary (Persons 65 and older) R7,713
Tertiary (Persons 75 and older) R2,574

Age Tax Threshold

Below age 65 R78,150
Age 65 to below 75 R121,000
Age 75 and over R135,300

Tax Treatment of Severance Benefits

For years, payroll administrators, tax consultants, accountants and human resource consultants have battled to get their heads around the tax treatment of tax directives pertaining to ‘voluntary’ retrenchments. There was a generally prevailing opinion that a ‘voluntary’ retrenchment did not qualify for the favourable tax treatment given to ‘involuntary’ retrenchments. The logic of this was that the employee had chosen to leave employment and that the termination was akin to a ‘mutual termination’. In reality though the concepts are far removed from each other from a tax treatment perspective. This article will focus on the concept of ‘retrenchment’ as a means of reducing the number of employees due to the closing of the business or for economic or restructuring reasons.

In a recent development the South African Institute of Tax Professionals (SAIT) made a submission to SARS stating that the concept of ‘voluntary retrenchment’, as opposed to forced retrenchment, exists in employment law. The courts have held that voluntary retrenchment agreements are valid and enforceable contracts.

Erika de Villiers, head of tax policy at SAIT, says that in the latest guide relating to tax directive forms SARS clearly makes a distinction between voluntary retrenchment and involuntary retrenchment. This new classification appears to reflect an interpretation that in the case of a voluntary severance package, the employee does not qualify for the more favourable tax treatment applicable to a severance benefit.

In terms of the tax tables for severance benefits, the first R 500 000 is tax free and the remaining amounts are taxed at a sliding rate, with 36% being the top rate. It is interesting to note that the voluntary retrenchment option is processed by SARS in the same way as normal taxable income, with the normal tax tables applicable to individuals being used. In such cases the IRP 5 source code used to report such income would be 3601 (normal taxable income).

The SAIT submission states that the Income Tax Act does not differentiate between voluntary and involuntary retrenchment packages. The definition of ‘severance benefit’ deals with amounts paid on retrenchment for an employee, and does not refer to the terms ‘voluntary’ or ‘involuntary’. Erika de Villiers says that SAIT is of the view that the SARS Completion Guide for the forms should be updated in order not to differentiate between ‘voluntary’ and ‘involuntary’ retrenchment.

SARS has been receptive to these comments and have stated that they will be amending their guides and forms in due course to reflect the change in policy. De Villiers says that in the interim SARS accepts that the voluntary retrenchment packages should be disclosed under the ‘involuntary’ retrenchment field on the application form, to ensure that the payment is treated correctly.

It is also important to note that should an employer negotiate a more favourable voluntary retrenchment package payable due to the operational reduction of staff, this payment will still fall within the definition of ‘severance benefits’ and qualify for the favourable severance benefit tables.

This certainly creates a complication for employers who have followed the policy currently in practice at SARS. Tax directives may need to be cancelled and new applications made. There is unfortunately only a small window of opportunity to do this before the 2018 tax year closes.

Employment Tax Incentive

Employment Tax Incentive – Claiming when not reported in a specific month.

The Income Tax Act allows employers to claim Employment Tax Incentive (ETI) until the end of each six-month cycle. As each six-month cycle ends with the EMP501 employer reconciliation process it seems obvious employers should be able to claim ETI up until their EMP501 is submitted. Not so according to the [email protected] software.

Assuming an employer has not submitted an ETI claim on the EMP201 for a particular month the obvious ways to claim during the six-month cycle would be to either add the additional valid claim on to the EMP501 or to amend the EMP201 for the month where the ETI should have been claimed (had all info been available at the time).

  1. Adding to the EMP501 – when one tries to do this [email protected] records an error stating that one cannot claim ETI on an EMP501 that is not reflected on the EMP201;
  2. Amending the EMP201 – [email protected] no longer allows the amendment of the EMP201 for ETI claims when the filing period to which it relates is finished.

[email protected] therefore prevents one from claiming the ETI within the six-month cycle. The best solution we understand is to use the Automated PAYE Dispute Management Process, but this is still to be tested fully.

UIF – As Applied to Learners

For a couple of years the Department of Labour has been talking about changes to the benefits to be provided to qualifying employees. These proposed changes have been widely published and discussed in payroll forums and at seminars.

The changes to the Unemployment Insurance Act, signed into law on 19 January 2017, have yet to be made effective. This Act deals with the payment of benefits, with changes to the ‘application’ of the Unemployment Insurance Act being introduced. Indications are the effective date will be 1 March 2018, but this remains to be seen.

The 2017 Bills make related changes to the ‘application’ of the Unemployment Insurance Contributions Act, which deals with contributions.

For both Acts, the provisions that excludes learners in terms of the Skills Development Act from contributing and being eligible to claim benefits, have been deleted. Once effective, the result of these changes is that all learners must contribute, and consequently be eligible to claim benefits.

Note however that both Unemployment Insurance Acts define an employee as per the Fourth Schedule of the Income Tax Act and exclude common law independent contractors, even if paid deemed remuneration (income reflected against IRP 5 code – 3616). The Fourth Schedule also defines the remuneration on which the contribution must be calculated, with some special exclusions. In my understanding, these exclusions do not apply to the learnership situation, and all learners will have to contribute.

To conclude, all learners will have to contribute, unless they are not an employee as defined, and contributions must be made unless the remuneration value is zero.