The Employment Tax Incentive Act No 26 of 2013 (“ETIA”) was signed by President Jacob Zuma and published in GovernmentGazette No 37185 on 18 December 2013. The main reason for implementing this incentive is to encourage employers to employ more young people in their organisations.
There are specific requirements set out in the ETIA to determine whether an employer will be eligible for this incentive but it will mainly be available to private companies.
Only South African citizens or permanent residents between the ages of 19 and 29 will be considered qualifying employees. There are no age limitations on the employees if the company operates within a Special Economic Zone (“SEZ”) or in a specific industry designated by the Minister of Finance by Notice in the Government Gazette. Only new employees employed from 1 October 2013 receiving salary that is between the minimum wage for that specific sector and R6 000 per month will be eligible to be qualifying employees
The incentive is only available for 2 years per employee and the amount of the incentive is determined based on the actual remuneration received by the employee.
The following example was published in the Explanatory Memorandum on the Draft Employment Tax Incentive Bill, 2013 which explains how the incentive will actually work:
“In respect of April, Eligible Employer employs 10 employees: One manager and 9 qualifying employees. For April, Eligible Employer has an employees’ tax liability towards SARS of R20 000 in respect of the manager’s salary (no employees’ tax liability exists in respect of the qualifying employees). The R20 000 is withheld from the manager’s salary in the form of employees’ tax.
Eligible Employer also has an incentive to the value of R5 000 available in respect of the qualifying employees. Eligible Employer may deduct the R5 000 incentive from the employees’ tax payable so that only R15 000 is payable to SARS for April.