ETI Amendments

As many of you will be aware the Taxation Laws Amendment Act (Annexure 1) was signed into law by the President last month. This, together with amendments to the Unemployment Insurance Amendment Act (Annexure 2), has an impact on those who offer learnerships and who utilise the Employment Tax Incentive. To assist, please find the most pertinent information outlined below:

TAXATION LAWS AMENDMENT ACT

  • The Amendment Act, on page 2, sets out the purpose of the act and it specifically references the Skills development Levies Act, Unemployment Insurance Contributions Act and the Employment Tax Incentive.
  • Training contracts that qualify for the deduction are learnerships registered with a sector education and training authority (SETA), or contracts of apprenticeship registered with the Department of Labour.
  • Pages 38 – 42 outline the various tax deductions that employers can claim in respect of Learnerships. These became effective October 2012 and are eligible until 01 April 2022. Important info to note:
    o Annual Allowance vs. Completion Allowance
  •  “annual allowance” means a deduction granted under section 12H (2) during any year of assessment in which a learner is a party to a registered learnership agreement;
  •  “completion allowance” means a deduction granted under section 12H(3) and (4) in a year of assessment in which a learner successfully completes a learnership;
    o Learnership agreements with individuals who hold qualifications NQF 1 – 6
  •  For 12-month learnership agreements a deduction of R40 000 is allowed.
  •  For learnership agreements less than 12-months, the deduction of R40 000 is allowed on a pro rata basis (calculated per month of the agreement).
  •  For learnership agreements less than 24-months, deduction of R40 000 is allowed
  •  For learnership agreements exceeding 24-months, deduction of R40 000 is allowed, multiplied by the number of consecutive 12-monthn periods within the duration of the agreement
  •  For any learner who is disabled (in accordance with definitions in section 6(B)1) an additional amount of R20 000 should be added to the deduction
    o Learnership agreements with individuals who hold qualifications NQF 7 – 10
  •  For 12-month learnership agreements a deduction of R20 000 is allowed.
  •  For learnership agreements less than 12-months, deduction of R20 000 is allowed on a pro rata basis (calculated per month of the agreement).
  •  For learnership agreements less than 24-months, deduction of R20 000 is allowed
  • For learnership agreements exceeding 24-months, the deduction of R20 000 is allowed, multiplied by the number of consecutive 12-monthn periods within the duration of the agreement
  • For any learner who is disabled (in accordance with definitions in section 6(B)1) an additional amount of R30 000 should be added to the deduction
    Qualification equal
    to NQF level 1-6 Qualification equal
    to NQF level 7-10
    Annual Allowance R40, 000 R20, 000
    Completion Allowance R40, 000 R20, 000
    Additional Allowance in respect of a person with a disability R20, 000 R30, 000
  • Page 88 provides the changes to Adult Education and Training and Continuing Education and Training, and the provision and publication of qualification and certification services.
  • Page 96 states that the Skills Development Levy and the UIF Levy percentage amount may now be changed, following approval in Parliament, based on the requirements of the national budget and that this amount would be effective from the date stipulated for a period of 12 months.
  • Pages 102 – 106 outlines the details pertaining to the Employment Tax Incentive (ETI) including its extension until 28 February 2019. Please click here for the SARS update

 

  • Important information to note:
    o Amendment of definition of “monthly remuneration”, effective 1 March 2017 as follows:
    ‘‘(a) where an employer employs and pays remuneration to a qualifying employee for [more than] at least 160 hours in a month, means the amount paid or payable to the qualifying employee by the employer in respect of a month; or
    (b) where an employer employs a qualifying employee and pays remuneration to that employee for less than 160 hours in a month

‘‘(i) where the employee is employed and paid remuneration for [more than] at least 160 hours in a month, the amount of R2 000 in respect of a month; or
(ii) where the employee is employed and paid remuneration for less than 160 hours in a month, an amount that bears to the amount of R2 000 the same ratio as 160 hours bears to the number of hours that the employee was employed for by that employer in that month.’’.
o Amendment relating to the deductions allowable per (monthly) remuneration category, in summary:

In the first year of employment of qualifying employees, incentive deductions equate as follows:

  •  R2000 or less is an amount 50% of monthly remuneration of employee;
  •  R2000 or more but less than R4000, is an amount of R1000;
  • R4000 or more but less than R6000, is an amount determined in accordance with the formula;
  • R6000 or more, the amount is nil.

In the second year of employment of qualifying employees, incentive deductions equate as follows:

  • R2000 or less is an amount 25% of monthly remuneration of employee
  •  R2000 or more but less than R4000, is an amount of R500;
  • R4000 or more but less than R6000, is an amount determined in accordance with the formula;
  • R6000 or more, the amount is nil.
  • For qualifying employees who work less than 160 hours per month, the incentive deduction amount should be calculated pro rata (relative to 160 hours per month), in line with the amounts outlined above.

UNEMPLOYMENT INUSRANCE CONTRIBUTIONS AMENDMENT ACT

  • The Unemployment Insurance deduction applies to learners on Learnerships who should have an employment contract for the duration of the Learnership.
Confederation of Associations in the Private Employment Sect