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Can ETI be claimed on seasonal workers?

19 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Can ETI be claimed on seasonal workers? The seasonal workers work for say 3 months, leave and then come back after say 2 months for another 3 months of work.

A: No reference is made in the Employment Tax Incentive Act (No. 26 of 2013) (hereinafter referred to as ‘the ETI’) as to the duration of the employment in order for an employee to constitute a qualifying employee. It is therefore submitted that seasonal employees and even employees only employed for one day may qualify. You may however want to give specific attention to the following sections of the ETI when determining if the employer would qualify in respect of an employee and what the allowance would be.

Provisions to take into consideration when determining if an employer qualifies in respect of an employee

Sec 6 of the ETI Act stipulates what constitutes a ‘qualifying employee’ and states the following:

‘6.   Qualifying employees.—An employee is a qualifying employee if the employee—

(a)  (i)  is not less than 18 years old and not more than 29 years old at the end of any month in respect of which the employment tax incentive is claimed;

(ii)  is employed by an employer operating through a fixed place of business located within a special economic zone designated by notice by the Minister of Finance in the Gazette and that employee renders services to that employer mainly within that special economic zone; or

(iii)  is employed by an employer in an industry designated by the Minister of Finance, after consultation with the Minister of Labour and the Minister of Trade and Industry, by notice in the Gazette;

(b)  (i)  is in possession of an identity card referred to in section 14 of the Identification Act, 1997 (Act No. 68 of 1997), issued to that employee after application for the card in terms of section 15 of that Act; or

(ii)  is in possession of an asylum seeker permit, issued to that employee in terms of section 22 (1) of the Refugees Act, 1998 (Act No. 130 of 1998), after application for the permit in terms of section 21 (1) of that Act;

(c)  in relation to the employer, is not a connected person as defined in section 1 of the Income Tax Act;

(d)  is not a domestic worker as defined in section 1 of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997);

(e)  was employed by the employer or an associated person on or after 1 October 2013 in respect of employment commencing on or after that date; and

( f )  is not an employee in respect of whom an employer is ineligible to receive the incentive by virtue of section 4.’

In terms of sec 6(e) of the ETI Act, the Incentive will only be available in respect of employees where their employment commenced on or after 1 October 2013. It is submitted that sec 6(e) of the ETI Act would be met if a person was employed before 1 October 2013 who left the employment in that period and who was re-employed on or after 1 October 2013.

Provisions to take into consideration when determining the incentive in relation to a seasonal worker.

Should a worker leave the employment during the course of a month i.e. not at the end of the month, special note would have to be taken of sec 7(5) of the ETI Act which states the following:

‘If an employer employs a qualifying employee only for a part of a month, the amount of employment tax incentive to be received in respect of that month in respect of that qualifying employee must be an amount that bears to the total amount calculated in terms of subsection (2) or (3) the same ratio as the amount of remuneration paid by the employer in respect of that month bears to the amount of remuneration that would have been payable in respect of that month had the employer employed that employee for the entire month.’

Sec 7(5) therefore has the effect that the ETI would be equal to the following:

amount of the incentive calculated in terms of sec 7(2) or (3) x actual remuneration paid to the employee in the month/the total remuneration that would have been payable had the employer employed the employee for the full month.

Disclaimer: Nothing in this query and answer 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 answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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