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Employment Tax Incentive Bill: Find out how it affects your company

by , 12 December 2013
As you know, the National Assembly adopted the Employment Tax Incentive Bill in Parliament in October. But, do you know the implications of the Bill on your company? Read on to find out how it affects you...

As mentioned, the Employment Tax Incentive Bill has been approved by the National Assembly.

Government says the Bill is aimed at reversing high levels of youth unemployment.

'The Bill proposes a youth wage subsidy aimed at encouraging employers, through tax incentives, to create job opportunities for young people aged from 18 to 29.'

SABC reports that the Bill could see a tax break of around R900 for employers for every person hired at R2000 per month for 24 months.

The big question is: Does the Bill apply to your company?

The Employment Tax Incentive Bill applies to you if you meet these requirements

According to the South African Institute of Tax Practitioners, the employment tax incentive is not available to all employers.

The Bill proposes that the employment tax incentive apply only to employers that are registered with SARS for Pay As You Earn (PAYE) purposes.

This means if you have a legal obligation to withhold and pay tax on behalf of your employees, through the PAYE system, you'll be eligible for the tax incentive.

The Institute explains that due to the fact that the incentive is aimed at private sector employers, public entities aren't eligible for the employment tax incentive, unless specifically designated by the Minister of Finance, by way of notice in the Government Gazette.

The employment tax incentive will also apply within Special Economic Zones (SEZs) and designated industries where the age restrictions will not apply.

The employment tax incentive is further limited to an eligible employer hiring a 'qualifying employee'.

Employment Tax Incentive Bill: Who are qualifying employees?

Only certain employees will qualify. This means a number of criteria must be met first:

  • For starters, the employee must be a South African citizen or permanent resident in possession of a valid South African Identity Document and must be between the ages of 19 and 29.
  • Secondly, the employee must not have been employed with the current employer (or an associated institution) before 1 October 2013. And must receive a salary that's between the minimum wage for that specific sector and R6000 per month.

That's not all.

  • Domestic workers and connected persons to the employer are specifically excluded from the definition of a 'qualifying employee' due to the private nature of the expense.

Government plans to introduce the tax incentive in January next year.

Knowing whether or not the Employment Tax Incentive Bill applies to you will help ensure you comply by taking on more young people in the age group 19 to 29 years.

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