Employment Tax Incentive (ETI) Unavailability for Reducing Employees’ Tax: Understanding the Provisions

There are certain circumstances under which employers are ineligible to reduce their employees' tax liability using ETI benefits. These provisions are outlined in Section 8 and 9 of the ETI Act.

Non-Tax Compliance and ETI Utilization:

An employer cannot reduce its employees’ tax liability using ETI if, on the last day of the relevant month:

- The employer is non-tax compliant, which includes:

? - Failure to submit any return.

? - Having any outstanding tax debt, with exceptions such as:

??? - Agreements for deferred payment or compromise of tax debt.

??? - Tax debt under suspension pending an objection or appeal.

??? - Tax debt totaling less than R1,000 across all taxes.

These provisions ensure that only tax-compliant employers can benefit from ETI incentives, promoting adherence to tax regulations.

Claiming Unclaimed Monthly ETI:

Regardless of tax compliance status, employers must claim any unclaimed monthly ETI by the last month of each PAYE reconciliation period (August or February). Section 9(3) of the ETI Act stipulates that unclaimed amounts at this time will be forfeited on the first day of the following month after the reconciliation period ends. Thus, any excess ETI as of September or March will be considered nil.

Reimbursement Process for Employers:

Section 10 of the ETI Act outlines the process for employers to obtain reimbursement for ETI amounts:

- Employers are entitled to reimbursement of total ETI amounts available at the end of each PAYE reconciliation period, which occurs every six months (August and February).

- If there's no employees’ tax to set off against the ETI amount, reimbursement is due.

- However, reimbursement is not granted if the employer is tax non-compliant.

- Employers have until the end of the next reconciliation period to rectify non-compliance, failure results in forfeiture of the refund amount.

- SARS will not pay refunds less than an R100 amount, carrying them forward to the following month of the next reconciliation period.

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