The 2021 Finances Overview contained a number of proposals in relation to people, employment tax and related advantages and incentives. Whereas a few of these proposals are moderately unclear, sure different proposals are noteworthy, says authorized agency Webber Wentzel.
Joon Chong, Wesley Grimm, Jess Fung from Webber Wentzel, moved to debate curbing abuse within the employment tax incentive (ETI) area and reviewing the character of long-service awards for fringe profit functions.
Curbing abuse within the ETI area
The ETI initiative was established by way of the Employment Tax Incentive Act, 2013 (ETI Act) and utilized from 1 January 2014. The intention of the ETI Act was to advertise elevated employment in South Africa.
ETI entitles a registered employer to cut back its pay-as-you-earn (PAYE) tax funds to SARS for the primary two years during which they make use of qualifying workers (at present between the ages of 18 and 29) who earn a month-to-month earnings inside a specific threshold (at present between R2,000 and R6,500).
SARS and Nationwide Treasury have noticed that there are particular abusive schemes utilizing coaching establishments which search to learn employers utilizing the ETI claims. These employers make an ETI declare for college students in these coaching establishments, which undermines the spirit of the ETI initiative.
To counter this abuse, the 2021 Finances Overview proposes that the definition of ’worker’ within the ETI Act be amended with a brand new requirement, specifically that work carried out by a qualifying worker by way of the ETI have to be carried out beneath an employment contract that complies with the record-keeping provisions of the Fundamental Situations of Employment Act, 1997.
The amended definition of "worker" is proposed to be efficient from 1 March 2021.
Employers claiming ETI ought to affirm with their most popular tax adviser whether or not they adjust to the proposed modification to the ETI Act to stop the danger of further assessments from SARS disallowing the ETI claimed.
Reviewing the character of long-service awards for fringe profit functions
By way of the Seventh Schedule to the Earnings Tax Act, employers might grant a long-service award to workers.
Lengthy-service awards which aren’t topic to PAYE are restricted to workers who’ve been employed for an uninterrupted interval of at the very least 15 years, and in intervals of 10 years after that.
A protracted-service award will likely be recognised as a no-value fringe profit provided that the worth of the award doesn’t exceed R5,000. The quantity of any award over R5,000 shall be taxed at an worker’s marginal charge.
2021 Finances Overview
The 2021 Finances Overview proposes that paragraph 5(2)(b) of the Seventh Schedule to the Earnings Tax Act be expanded to contemplate the vary of long-service non-cash advantages awarded by employers to long-service workers.
The proposed expanded scope would nonetheless not be topic to PAYE if the worth of non-cash advantages is throughout the R5,000 restrict.
Whereas we welcome the transfer to develop the scope of what qualifies as a long-service award, in our view this will likely even have been an opportune time to considerably enhance the R5,000 threshold, which has been in place since 2009.
- By Joon Chong, Wesley Grimm, Jess Fung from Webber Wentzel
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