The proposed measures for Covid-19 tax relief were published in draft bills on April 1 2020, with revised draft bills published on May 1 and May 19 respectively.
The most recent iteration of the Disaster Management Tax Relief Bills saw substantial changes to the calculations and requirements for the Employment Tax Incentive (ETI) relief offered to employers. This has created a lot of confusion for employers.
As such, employers that calculated their claims as per the draft legislation in April will have to revise their claim and align it with the bills published on May 19. Since some changes are retrospective, employers will need to apply the changes to claims dating to April 1. The first set of bills proposed the following:
- Increased ETI amounts of up to R500, depending on the remuneration of the employee.
- Employees who did not qualify based on the usual criteria could now qualify. This included employees who already qualified for ETI for 24 months and employees who are 30 to 65 years old.
- The ETI amounts for the new qualifying employees should not have been pro-rated if they were employed and remunerated for less than 160 hours during the month. An employee could have been employed and paid for 1 hour and still qualify for ETI of up to R500.
- The requirement to be employed on or after 1 October 2013 to qualify for ETI was still applicable.
- There was no proposal to amend the “monthly remuneration” used in the calculation of ETI if an employee was employed and remunerated for less than 160 hours during the month.
The revised Bills published on 19 May made the following changes:
- An increased ETI amount of up to R750, depending on the remuneration of the employee, effective on 1 April 2020.
- The “monthly remuneration” used in calculating the ETI amount should not be grossed up to 160 hours if an employee was employed and remunerated for less than 160 hours. The actual remuneration is used to calculate the ETI amount. This is only applicable for May to July and does not affect the remuneration calculated for April.
- The additional ETI amount for the new qualifying employees should be prorated if they were employed and remunerated for less than 160 hours during the month. This requirement means that employers would have over-claimed ETI in April since the value was not prorated in the first draft.
- The requirement to be employed on or after October 1 2013 to qualify for ETI was removed, but only from May to July. The ETI calculation would also differ for those employees employed before 1 October 2013, or employees employed on or after 1 October 2013.
- If no wage regulation measure or the national minimum wage was not applicable to an employee, the employee could still qualify if a wage of at least R2 000 was paid. This requirement was removed effective May to July.
Most of these changes only have to be applied from May to July and would not affect the claims an employer already made for April. Due to the ETI calculation and the new pro-rata requirements mean that most employers may have filed inaccurate claims for April and possibly for May, too. If an employer claimed more in a month than it was supposed to, it will need to restate the EMP201.
If it claimed a lesser amount than it was entitled to, it can add the difference in the ETI value to the next month’s claim on the EMP201. This should help clear the confusion and save time for employers. The good news is, these calculations should automatically be applied if you have an electronic payroll system.
By Yolandi Esterhuizen, registered tax practitioner & Compliance Manager, Sage Africa & Middle East