Employment Tax Incentives: Employee criteria to qualify.

The following article details the criteria for employees who qualify for the ETI, referencing pertinent sections of the ETI Act and other relevant legislation.

Qualifying Employees

To qualify for the Employment Tax Incentive, an employee must meet several criteria outlined in the ETI Act. According to Section 6 of the ETI Act, qualifying employees must:

·??????? Age Requirement: Be between the ages of 18 to 29 years old. However, this age limit does not apply if the employer is a "qualifying company" as defined in section 12R of the Income Tax Act and the employee renders services mainly within a Special Economic Zone (SEZ).

·??????? Legal Status: Possess a valid South African identity card, Asylum Seeker permit, or identity document issued in terms of the Refugees Act.

·??????? Employment Commencement: Have been employed by the employer on or after 1 October 2013.

·??????? Income Threshold: Earn a monthly wage of at least R2,000, with remuneration not exceeding R6,500 per month, provided the employee was employed for at least 160 hours in a month.

·??????? SEZ Employment: For employees working in SEZs, the age limit is waived if the employer is a qualifying company and the employee renders services mainly within the SEZ. The Minister of Finance has identified six SEZs for this purpose.

Qualifying Company:

For an employer to be considered a qualifying company, certain conditions must be met, including incorporation or effective management in South Africa, carrying on an approved trade within a SEZ, and deriving 90% of income from activities within SEZs. Certain activities, such as distilling and manufacturing of tobacco products, are excluded from qualifying.

Exclusions:

Certain categories of employees are excluded from qualifying for the ETI, including domestic workers and "connected persons" to the employer.

It is important to understand the definition of an Employee:? and is defined as a natural person who works for another person, receives remuneration, and is documented in the employer's records as per the record-keeping provisions of relevant legislation. Independent contractors are not considered employees.

Employees must not be mainly involved in studying unless part of an approved learning program. If studying, the ETI must be calculated on a pro-rata basis based on actual hours spent studying and employed.

Qualifying Periods

The qualifying periods, as per Section 7(1) of the ETI Act, include any period from 01/01/2014, with a maximum period of 24 months per qualifying employee. The ETI calculation should be apportioned for employees not employed for a full month, and the qualifying period applies to associated institutions and redeployments within the same group of companies.

Understanding the criteria outlined in the ETI Act is crucial for both employers and employees to maximize the benefits of the Employment Tax Incentive. Compliance with these criteria ensures that eligible employees receive the intended incentives, contributing to the overall objectives of reducing youth unemployment and stimulating economic growth.

For further guidance and detailed information, employers can refer to the "Guide for Employers in Respect of Employment Tax Incentive" provided by SARS.

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