SARS to reimburse employers for excess employment tax incentive credits
12 February 2015
Posted by: Author: BDO South Africa
Author: BDO South Africa
On 18 December 2014, the Minister of Finance, Nhlanhla Musa Nene, made a notice in the Government Gazette (GG 38346; Notice 1039) that section 10 of the Employment Tax Incentive Act, 2013 (‘ETIA') would come into effect on 19 December 2014.
Section 10 of the ETIA allows for the introduction of a reimbursement process that will refund employers the amount of the allowable Employment Tax Incentive (‘ETI') in excess of Employees' Tax payable, which therefore results in a credit amount owing to the employer, as at the end of each six monthly EMP501 reconciliation period (31 August and end February).
Where the amount of the ETI exceeds the Employees' Tax payable during a particular month, the excess is rolled over as a credit to the following month. If an employer does not claim the ETI in any particular month (for example, in ignorance of the legislation) the unclaimed amount may be claimed in the following month. If the employer becomes disqualified from claiming the ETI by virtue of not being in good standing with SARS, then the ETI amounts continue to accumulate during the period of disqualification.
In terms of section 10 of the ETIA, SARS will pay out the total of such excess credits due at the EMP501 reporting dates in cash to the employer, provided that the employer is in good standing with SARS. Good standing in terms of section 10 means that all required tax returns have been submitted and there is no outstanding tax debt, with certain exclusions. The main such exclusion is for tax debt for which arrangements for payment have been made with SARS. If the employer was not in good standing with SARS and rectifies the situation, SARS will pay out the excess credit in the first month during the next EMP 501 reporting period, in which the matter is rectified.
However, it should also be noted that a non-compliant employer has six months from the start of the next reconciliation cycle (1 September or 1 March) to correct any non-compliance and be able to receive the ETI refund. If the employer does not become compliant by the end of the next six month reconciliation period, the ETI refund will be forfeited.
This article first appeared on bdo.co.za.