Employment Tax Incentive - ETI

Transcription

1 Employment Tax Incentive - ETI Gareth Hardy 2 December 2015

2 Disclaimer This is an informative presentation on our experience relating to ETI. Nothing in this presentation should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the material, the presenters do not accept any responsibility for consequences of decisions taken based on the material. It remains your own responsibility to consult the relevant primary resources when taking a decision We do offer professional services relating to ETI.

3 ETI Webinar Overview Short History Requirements Calculations Misconceptions Complexity Getting it wrong Payroll limitations Easyfile ETI A case study (Todays Focus Practical Application) ETI Reimbursement of refund?

4 ETI A short history ETI introduced by National Treasury to combat unemployment, skills shortage and create new jobs. ETIA 26 of 2013 came into effect 1 January ETIA own definitions, many of these contained in other Acts. ETI poorly communicated, complex, misunderstood slow uptake millions forfeited - deemed by many uneconomical to use SARS announces ETI reimbursement process in place and working. Refund process poorly communicated, misunderstood, slow uptake History to repeat itself?

5 ETI Resources - Available information Employment Tax Incentive Act 26 of 2013 SARS Draft Guide to the Employment Tax Incentive (Closed for comments 16 October 2015) - Most useful SARS website SARS Business Requirements Specifications Professional bodies - SAIT Payroll guides Various National Treasury and SARS presentations Media Todays webinar based on consolidation of above

6 ETI In a nutshell Incentive is for the employer (Qualifying Employer) Calculated using a formula submitted monthly with your EMP 201. ETI benefit used as a credit against your PAYE. Formula calculation based on qualifying employees i.e. per person per month. Available for 24 months. ETI Reimbursements every 6 months. ETI benefits are tax neutral. 28 ETI tax critical events Available 1 January 2014 to date, ends 1 January 2017.

7 ETI Must haves Quick Summary Qualifying Employer Registered for PAYE Commercial companies (Government bodies usually excluded) Qualifying Employer ETI Tax compliant Be able to calculate ETI correctly each month. Qualifying Employees SA Citizen, Green ID book Aged 18 to 29 Earns between R2 000 to R6 000 p.m. Benefit R1000/R500 Meets minimum wage requirements. Employed on or after 1 October Have sufficient source documents

8 ETI How it works ETI is a self assessment return (Much like other taxes, SARS rely on YOU to get right). Every month you calculate how much PAYE is due to SARS. You then would run a separate report to see what your Calculated ETI should be. You offset the Calculated ETI against what you would have been liable to pay. Complete EMP 201 and submit to SARS. You receive your ETI benefit immediately. Complete and submit EMP 501 s. You automatically receive re-imbursement. ETI is easy, right?

9 ETI Compliance A tax clearance certificate is NOT ETI compliance Compliance is measured on the day of submission Detailed knowledge of the Tax Administration Act required in regard to these aspects. An employer will not be eligible to claim the ETI in a month if the employer has any outstanding tax returns or A tax debt

10 ETI is easy NO - Calculations In principle simple, in practice extremely complex Calculation done per qualifying employee per month Stages of computation: ETL (Extract, Transform, Load). Loads data into computational engine from HR data dump. Employee validation: - Employment date - Age at beginning of period - Disqualifiers (Domestic Workers, Asylum seekers etc.) Record creation: Creates and readies data records for computation. For each employee, for each month.

11 ETI is easy NO - Calculations Record Creation continued. Age validated each month. Remuneration per employee per month calculated (Includes apportionment) Calculation Apply SARS ETI formula to extracted data Includes number of months ETI has been claimed for that employee previously (Just because they qualified doesn t mean you claimed. Insert ETI data into payroll output to E@syFile, thereby reconciling submission with EMP201 and EMP501 Generate detailed reports, including SARS audit reports.

12 Getting it wrong Example: Company A normally owes R each month for PAYE. Payroll calculates ETI for March at R They pay nothing to SARS, ETI is greater than PAYE. SARS audit your March return 5 months later. At the time you submitted March you owed SARS R in VAT which you resolved in April. SARS were wrong with their VAT assessment. What happens now?

13 Getting it wrong what it means SARS raises an assessment for R penalty of R and interest on top of that. All your PAYE returns are now wrong from April to August, your half year reconciliation submitted is wrong and, worst of all. You may calculate your ETI but may not utilise it going forward until you have paid them the outstanding balance. No problem you say, SARS can set off the R against my ETI. Unfortunately not it doesn t work that way. You may not offset ETI against a tax debt. More importantly, you can never offset tax penalties against ETI or interest charged Good news, this situation is easy to avoid. Send the correct correspondence to SARS before submitting your ETI

14 ETI A case study Can you claim more than your PAYE? Is it really worth the admin of claiming ETI. Is your ETI calculated correctly? Refund or re-imbursement? Reasons for ETI re-imbursement? You decide

15 ETI Case Study, Facts February 2015 Started with the claims process included 20 periods. Jan 14 to August Claim audited for 2½ months by SARS Specialist ETI audit team September 2015 Audit outcome: No Adjustments approved for refund November 2015 Claim paid out months from beginning to end (There are still certain outstanding matters)

16 ETI SARS audit Information requested in.csv format or excel. Audit period = All ETI claims submitted Audit information requested All calculations Contracts of employment

17 ETI Cash Benefit analysis Assume a R PAYE liability for the periods Your start off base is negative i.e. PAYE - R you would have to pay to SARS Using ETI credit offset mechanism: Your PAYE is covered by your ETI R , up by R ETI benefit fully utilised, up by R (cash) that gets deposited into your bank account tax free. Does it matter when you start claiming - Yes

18 ETI Cash benefit analysis Details No ETI claimed Only ETI credit mechanism offset Full ETI claimed ETI Benefit R R0 Amount of tax payable

19 ETI Refund Analysis Graph ETI Comparison ETI Full Utlised ETI credit offset mechanism only

20 ETI Refunds Challenges if you claim SARS has are in process of putting re-imbursement procedures in place. Expect a rigorous audit from SARS, have your audit packs ready and check your calculations. Ensure your staff have sufficient technical knowledge to deal with the refund and answer questions. Know the difference between ETI compliance and a tax clearance certificate compliance. Literally hundreds of hours corresponding. The process will put additional pressure on your internal resources during EMP 501 filing season. Only 2 more ETI re-imbursement opportunities.

21 Claiming your re-imbursement Critical! Get the calculations right. Payroll software works however is hampered cut off periods, relies on user input, inconsistencies. Excel Limitations Very hard to manage and apply rules consistently We use a ETI system which a stand alone and purpose built. Interfaces with payroll, e@syfile and generates the necessary SARS audit reports On average generates 260 records per employee per month and is not affected by payroll cut-offs or year-ends. Thank you to SAIT for assisting our client.

22 ETI - Reimbursement or Refund Which one is ETI? Section 10 of the ETI Act Reimbursement We have intentionally been using refund and reimbursement in the previous slides.. ETI IS A REIMBURSEMENT. THE GOVERNMENT is REIMBURSING YOU FOR WHAT IS already YOURS. It s up to you to claim it. If time allows questions

23 ETI If you are going to claim you better get started now

24 Additional ETI information If you would like to find out more: Calculate your potential ETI benefit Detailed ETI submission processes Contacts us to find out Contact Details Gareth Hardy