Employment Tax Incentive – Non-Binding Private Opinion

Employment Tax Incentive – Non-Binding Private Opinion

Payroll / eTorQue, Tax

Editor’s Note: The guidance below is useful in interpreting ETI which continues to be a challenge for employers given the problems with SARS systems. However, please be aware that where the article refers to PAGSA these are opinions only and not binding.

It has been a tumultuous 12 months in terms of ETI. There have been many queries regarding this incentive and one wonders whether all the effort that is going into the interpretation of the law is worth it considering it will only be valid until 2019.

Directly after the promulgation of the amendments to the Employment Tax Incentive Act on 19 January 2017, the Payroll Authors Group of South Africa (PAGSA) requested guidance from SARS to assist payroll suppliers and employers to implement and apply the new requirements correctly. SARS issued a Non-Binding Private Opinion dated 7 February 2017 in response to the queries.

In summary, the following interpretations have been forwarded by SARS:

SARS will refund unclaimed ETI if:

  • The PAYE was less than the ETI
  • The employer was not tax compliant, but later became tax compliant

No refunds will be made for any other reason.

The term employed and paid remuneration’ hours (if less than 160) must be used to:

  • ‘gross up the ‘wage’ paid (to be checked against the monthly minimum wage)
  • ‘gross up’ the ‘monthly remuneration paid (to be checked against R6 000 per month)

The wording of ’employed and paid remuneration’ was clarified by SARS to be:

  • ’employed’ hours, less
  • ‘Unpaid’ hours, plus (this reduces ‘wage’)
  • ‘Premium’ hours (this increases ‘remuneration’)

The PAGSA has summarised this to mean:

  • ‘Employed hours’ for ‘contracted’ employees is the average working hours per month (173 hours or 195 hours) and for wage employees the weekly hours of 160 hours for a 4 week month and 200 hours for a 5 week month.
  • For casuals these hours will be the actual hours worked.
  • ‘Unpaid’ hours are hours that are not worked and not paid.
  • ‘Premium’ hours are hours worked that exceed the ordinary hours of work.

The clarity on these issues will go some way to assisting payroll administrators with the interpretation of the ETI legislation and its application in payroll. Like any relatively new legislation though we will continue to have teething problems that will only be rectified by organisations like the PAGSA raising concerns with SARS. We will continue to keep you abreast of any changes or interpretations as we receive updates from SARS and the PAGSA.