• Beware the qualifying criteria
  
  
  • Employers must meet the qualifying criteria on an ongoing basis, including being registered for Employees’ Tax (PAYE) and being tax compliant.
    
    
  • Employees must meet the qualifying criteria on an ongoing basis, including having a valid South African ID or permit; be between 18 and 29 years old; earning between minimum wage or R2 000 and R6 500 for a 160-hour month; and who is not a domestic worker or a “connected person” to the employer.
    
    
• Beware the continuous changes
  
  
  • The value of the ETI is not static but depends on the value of the monthly remuneration paid to the qualifying employee, and must be calculated each month for each qualifying employee. In addition, if a qualifying employee worked less than 160 hours in the month, the value of the ETI must be calculated proportionally.
    
    
  • The ETI is constantly being refined, expanded and tightened – including a series of amendments to the ETI Act with effect from 1 March 2022, so employers claiming ETI must stay updated to ensure they remain within the bounds of the ETI Act.
    
    
• Beware the deadlines
  
  
  • If all the allowable ETI wasn’t used at the end of each six-month reconciliation period (1 March – 31 August and 1 September – 28 February), employers may be refunded the amount, if they are fully tax compliant.
     
  • A non-compliant employer will have until the end of the next reconciliation cycle to correct any non-compliance and be able to receive the ETI refund. If the employer doesn’t become compliant by the end of the next six-month reconciliation period, the ETI refund will be forfeited.
    
    
• Beware the possible penalties
  
  
  • Penalties equal to 100% of the ETI claimed will apply when an employer claims the ETI for any employee who does not qualify.
    
    
  • Penalties imposed will result in under-payment of employees’ tax, which could result in possible interest and penalties in terms of the Tax Administration Act.
    
    
  • A penalty of R30 000 will be levied for each employee displaced to employ an employee who qualifies.
    
    
  • It has been proposed that the ETI Act be amended to impose understatement penalties on reimbursements that are improperly claimed.
    
    
• Beware the potential of audits
  
  
  • A number of taxpayers have faced time-consuming and costly verifications and audits of their ETI claims.
    
    
  • Additional assessments issued by SARS may reverse the ETI initially claimed by employers.
    
    
  • Recordkeeping is required by the ETI Act.
     
• Beware of potential scams
  
  
  • Employers should exercise vigilance regarding tax abusive ETI schemes and scams offered by third parties, as the employer would carry all the risk in respect of the tax and labour obligations.

Seek professional assistance to ensure you can navigate all these potential pitfalls and claim this ETI incentive, so you can employ more young people while sharing the cost with government.