Compensation of Ocuppational Injuries on Duty (COID)

Earnings
Below please find the “Return of Earnings” ROE guidelines which explains what is earnings for purposes of completing the ROE.
The COID Act uses ‘remuneration’ in its definition of ‘earnings’, being –
“… the remuneration of an employee at the time of the accident or the commencement of the occupational disease as calculated in this Act.”
Remuneration is not defined, but is “… calculated in terms of this Act.”. Section 63 that deals with the calculation of earnings, is of no help. It seems that the W.As 8 form that must be completed by employers for their annual return contains the most practical and up to date information to help us to find out what remuneration is.
The W.As 8 form states that ‘earnings’ are all payments that are made regularly, before any deductions, in cash or in kind, and to employees. It then lists a number of items that are included in earnings, and a number that are excluded, and qualifies this by stating that the list is not exhaustive.
Included in gross earnings are the following:
• overtime of a regular nature;
• bonuses of any kind;
• commission (UIF take note!);
• cash value of food & quarters, company car, free or cheap accommodation;
• travel and other allowances paid regularly;
• the employee’s package, excluding employer contributions such as medical aid;
• earnings/drawings paid to working directors and members.
Excluded from gross earnings are the following:
• payments of a reimbursive nature;
• overtime worked occasionally;
• payments for non recurring tasks that are not part of the employee’s normal duties;
• ex gratia payments;
• intangible fringe benefits such the medical aid benefit;
• special expenses such as subsistence and travel costs, lunch, meetings etc.;
• travel and other allowances paid occasionally;
• if a director’s remuneration is profit share, the director is not included by the Act.
Some comments on these inclusions and exclusions –
• The principle is that regular items are included and irregular items are excluded;
• Another principle is that tangible (things you can touch) payments in kind (benefits and employer contributions) are included; intangible payments in kind are excluded;
• The inclusion of travel and other allowances paid regularly is in conflict with the labour law principle that allowances, whether regular or not, are payments to allow work to take place and are not included in an employee’s BCEA remuneration;
• One can only assume that all employer contributions are excluded, not only those made to a medical aid. Again, this in conflict with the BCEA, which includes all these ‘payments in kind’ to benefit and retirement funds into BCEA remuneration.
Earnings up to the maximum of the COID limit must be declared per employee at the end of each year (February), and this maximum earnings amount is included in the totals on the W.As 8 return form.
The definition of remuneration for the CF will in the future be the same as the definition of remuneration for UIF, with the same exclusions, except that commission is excluded from UIF but will be included for CF. The COID Amendment Bill is final but has not yet been promulgated, so it is not yet in effect (maybe sometime in 2023?). So currently we must still use ‘earnings’ while knowing that ‘remuneration’ is around the corner.
When ‘remuneration’ replaces ‘earnings’ down the line (with the promulgation of the Amendment Bill), it will be a radical change. Employers will be informed that it is a radical but necessary change, and their assessment could go either up or down in the future depending on the circumstances.
Also note that the fund has recently changed the ‘risk’ percentages per sector type (in many cases reducing the percentages) therefore a lower assessment value.
Tips
1. Be consistent:
Recommend the same thing for all of your clients
2. Don’t change now:
Unless there is good reason, don’t change from what you have been advising in the past. Keep doing what you have been doing unless you are certain that it is incorrect.
3. This last point is for you to decide.
Knowing that remuneration will replace earnings at some stage in the future, if you are uncertain of whether a remuneration type is ‘earnings’ or not, consider including it now as ‘earnings’ if it is currently ‘remuneration’. Then you will be moving in the right direction.

Employer
The Occupational Injuries and Diseases Act defines an employer as:
“any person, including the state, who employs an employee, and includes –
• any person controlling the business of an employer
• if the services of an employee are lent or let or temporarily made available to some other person by his employer, such employer for such period as the employee works for that other person
• a labour broker who against payment provides a person to a client for the rendering of a service or the performance of work, and for which service or work such person is paid by the labour broker.”
This definition, as in the Basic Conditions of Employment Act, is dependent on the existence of an employee. Further –
1. The first bullet brings in the concept of representative employers as in the Fourth schedule.
2. The second bullet seems to specify that where a ‘casual’ arrangement has been made for an employee to work for another employer, then the employer where the employee works becomes the responsible employer.
3. The third bullet provides that a labour broker is the employer of a worker supplied by the labour broker to a client and is responsible under the Act for that worker.
Employee
An employee is defined as:
“ … a person who has entered into or works under a contract of service or of apprenticeship or learnership, with an employer, … and whether the remuneration is calculated by time or by work done, or is in cash or kind, and includes:
• a casual employee employed for the purpose of the employer’s business;
• a director or member … who has entered into a contract … in so far he acts within the scope of … such contract;
• a person provided by a labour broker … for the rendering of a service or the performance of work, and for which … such person is paid by the labour broker;
• in the case of a deceased employee, his dependants, …”
Excluded as employees are:
• persons undergoing military service or training
• members of the Permanent Force while defending the Republic
• members of the Police Force while defending the Republic
• a person who contracts for the carrying out of work and himself contracts other persons to perform such work
• a domestic employee in a private household.
Being an Act administered by the Department of Labour, one can safely assume that the reference to working under “… a contract of service …“ as opposed to a contract for services, is intended to exclude labour law independent contractors. See the paragraph which deals with contracts of service in the BCEA Chapter of this manual.
Learners working in terms of a learnership agreement are specifically included, irrespective of whether they have an employment contract or not.
Incorrect classification
Where an employer is incorrectly classified for COID purposes due to the online registration functionality which do not allow the correct sub-class selection, the employer may completed the CF-1B (Application for the Change of the Nature of Business) form and mail it to [email protected] and [email protected] for correction.
Evidence should also be forwarded with the completed forms.
The industry classifications should be use in order to ensure that the correct sub-class is selected.
Incorrect assessment rate applied by COID
Where an incorrect assessment was applied by the COID Commissioner due to the incorrect classification of the employer due to the online registration functionality which do not allow the correct sub-class selection, the employer may completed the CF-1B (Application for the Change of the Nature of Business) form and mail it to [email protected] and [email protected] for correction.
Evidence should also be forwarded with the completed forms.
The industry classifications should be use in order to ensure that the correct sub-class is selected.

EMPLOYMENT TAX INCENTIVE ACT, NO. 26 OF 2013

1. Definitions.—
(1) In this Act, unless the context indicates otherwise—
“associated person”, in relation to an employer—
(a) where the employer is a company, means any other company which is associated with that employer by reason of the fact that both companies are managed or controlled directly or indirectly by substantially the same persons;
(b) where the employer is not a company, means any company which is managed or controlled directly or indirectly by the employer or by any partnership of which the employer is a member; or
(c) where the employer is a natural person, means any relative of that employer;

“company” means a company as defined in section 1 of the Companies Act, 2008 (Act No. 71 of 2008);

“employee” means a natural person—
(a) who works for another person and in any other manner directly or indirectly assists in carrying on or conducting the business of that other person;
(b) who receives, or is entitled to receive remuneration from that other person; and
(c) who is documented in the records of that other person as envisaged in the record keeping provisions in section 31 of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997),
but does not include an independent contractor;
[Definition of “employee” substituted by s. 58 (1) (a) of Act No. 20 of 2021 with effect from 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date.]

“employees’ tax” means the amount deducted or withheld and that must be paid over to the Commissioner for the South African Revenue Service by virtue of paragraph 2 (1) of the Fourth Schedule to the Income Tax Act;

“Income Tax Act” means the Income Tax Act, 1962 (Act No. 58 of 1962);

“Labour Relations Act” means the Labour Relations Act, 1995 (Act No. 66 of 1995);

“monthly remuneration”—
(a) where an employer employs and pays remuneration to a qualifying employee for at least 160 hours in a month, means the amount paid or payable to the qualifying employee by the employer in respect of a month; or;
(b) where the employer employs a qualifying employee and pays remuneration to that employee for less than 160 hours in a month, means an amount calculated in terms of section 7 (5):
Provided that in determining the remuneration paid or payable, an amount other than a cash payment that is due and payable to the employee after having accounted for deductions in terms of section 34(1)(b) of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997), must be disregarded;
[Definition of “monthly remuneration” substituted by s. 112 (1) of Act No. 43 of 2014, amended by s. 93 (1) of Act No. 15 of 2016 and substituted by s. 2 (1) (a)-(d) of Act No. 13 of 2020 and by s. 58 (1) (b) of Act No. 20 of 2021 with effect from 1 March 2022 and applicable in respect of years of assessment commencing on or after that date.]

“qualifying employee” means an employee contemplated in section 6;

“special economic zone” means a special economic zone as defined in section 12R (1) of the Income Tax Act;
[Definition of “special economic zone” substituted by s. 78 (1) of Act No. 34 of 2019 with effect from 1 March, 2020.]

“Tax Administration Act” means the Tax Administration Act, 2011 (Act No. 28 of 2011);

“wage” means wage as defined in section 1 of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997).
(2) For the purposes of the definition of “monthly remuneration” in subsection (1), “remuneration” has the meaning ascribed to it in paragraph (1) of the Fourth Schedule to the Income Tax Act.
(3) For the purposes of paragraph (c) of the definition of “associated person” in subsection (1) “relative”, in relation to any person, means the spouse of that person or anybody related to him or her or to his or her spouse within the third degree of consanguinity, or any spouse of anybody so related.
Part I
Employment tax incentive
2. Instituting of employment tax incentive.—
(1) An incentive, called the employment tax incentive, in order to encourage employment creation is hereby instituted.
(2) If an employer is eligible to receive the employment tax incentive in respect of a qualifying employee in respect of a month, that employer may reduce the employees’ tax payable by that employer in an amount determined in terms of section 7 or receive payment of an amount contemplated in section 10 (2), unless section 8 applies.
Part II
Eligible employers and qualifying employees
3. Eligible employers.—An employer is eligible to receive the employment tax incentive if the employer—
(a) is registered for the purposes of the withholding and payment of employees’ tax by virtue of paragraph 15 of the Fourth Schedule to the Income Tax Act; and
(b) is not—
(i) the government of the Republic in the national, provincial or local sphere;
(ii) a public entity that is listed in Schedule 2 or 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), other than those public entities that the Minister of Finance may designate by notice in the Gazette on such conditions as the Minister of Finance may prescribe by regulation;
(iii) a municipal entity defined in section 1 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000); and
(c) is not disqualified from receiving the incentive—
(i) by the Minister of Finance in accordance with section 5 (1) (b), due to the displacement of an employee by virtue of section 5 (2); or
(ii) by not meeting such conditions as the Minister of Finance, after consultation with the Minister of Labour, may prescribe by regulation, including—
(aa) conditions based on requirements in respect of the training of employees; and
(bb) conditions based on the classification of trade in the most recent Standard Industrial Classification Code issued by Statistics South Africa.

4. Compliance with wage regulating measures.—

(1) An employer is not eligible to receive the employment tax incentive in respect of an employee in respect of a month if the wage paid to that employee in respect of that month is less than—
(a) the higher of the amount payable by virtue of a wage regulating measure applicable to that employer or the amount contemplated in section 4 (1) of the National Minimum Wage Act, 2018 (Act No. 9 of 2018), or Schedule 2 to that Act; or
(b) if the amount of the wage payable to an employee by an employer is not subject to any wage regulating measure or not subject to section 3 of the National Minimum Wage Act, 2018 (Act No. 9 of 2018), or exempt under section 15 of that Act—
(i) where the employee is employed and paid remuneration for at least 160 hours in a month, the amount of R2 000 in respect of a month; or
(ii) where the employee is employed and paid remuneration for less than 160 hours in a month, an amount that bears to the amount of R2 000 the same ratio as 160 hours bears to the number of hours that the employee was employed for and paid remuneration by that employer in that month.

(2) If an employer receives the employment tax incentive in respect of an employee despite not being eligible by reason of subsection (1), that employer must pay a penalty to the South African Revenue Service in an amount equal to 100 per cent of the employment tax incentive received in respect of that employee in respect of each month that the employer received the employment tax incentive.

(3) For the purposes of this section “wage regulating measure” means—
(a) a collective agreement as contemplated in section 23 of the Labour Relations Act;
(b) a sectoral determination as contemplated in section 51 of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997); or
(c) a binding bargaining council agreement as contemplated in section 31 of the Labour Relations Act, including where such agreement is extended by reason of a determination of the Minister of Labour in terms of section 32 of that Act.

(4) For the purposes of this section, “hours” means “ordinary hours” as defined in section 1 of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997).
[Sub-s. (4) added by s. 91 (1) (b) of Act No. 17 of 2017 with effect from 1 March, 2018.]

5. Penalty and disqualification in respect of displacement.—

(1) Where an employer is deemed to have displaced an employee as contemplated in subsection (2), that employer—
(a) must pay a penalty to the South African Revenue Service in an amount of R30 000 in respect of the employee that is displaced; and
(b) may be disqualified from receiving the employment tax incentive by the Minister of Finance by notice in the Gazette after taking into account—
(i) the number of employees that have been displaced by the employer; and
(ii) the effect that the disqualification may directly or indirectly have on the employees of the employer.

(2) For the purposes of subsection (1), an employer is deemed to have displaced an employee if—
(a) the resolution of a dispute, whether by agreement, order of court or otherwise, reveals that the dismissal of that employee constitutes an automatically unfair dismissal in terms of section 187 (1) (f) of the Labour Relations Act; and
(b) the employer replaces that dismissed employee with an employee in respect of which the employer is eligible to receive the employment tax incentive.

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;
[Sub-para. (i) substituted by s. 4 (1) (a)-(d) of Act No. 13 of 2020 deemed to have come into operation on 1 December, 2021 and applicable in respect of any remuneration paid on or after that date.]
(ii) is employed by an employer that is a qualifying company as contemplated in section 12R of the Income Tax Act, and that employee renders services to that employer mainly within the special economic zone in which the qualifying company that is the employer carries on trade; or
[Sub-para. (ii) substituted by s. 80 (1) (a) of Act No. 34 of 2019 with effect from 1 March, 2020.]
(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;
[Sub-para. (i) amended by s. 115 (1) (a) of Act No. 43 of 2014 deemed to have come into operation on 1 January, 2014.]
(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; or
(iii) is in possession of an identity document issued in terms of section 30 of the Refugees Act, 1998 (Act No. 130 of 1998);
(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;
[Para. (e) amended by s. 115 (1) (b) of Act No. 43 of 2014, deleted by s. 4 (1) (e) of Act No. 13 of 2020, inserted by s. 4 (1) (f) of Act No. 13 of 2020, deleted by s. 4 (1) (g) of Act No. 13 of 2020 and inserted by s. 4 (1) (h) of Act No. 13 of 2020 deemed to have come into operation on 1 December, 2021 and applicable in respect of any remuneration paid on or after that date.]
(f) is not an employee in respect of whom an employer is ineligible to receive the incentive by virtue of section 4; and
(g) receives remuneration in an amount less than R6 500 in respect of a month.
[Para. (g) added by s. 115 (1) (b) of Act No. 43 of 2014 and substituted s. 80 (1) (b) of Act No. 34 of 2019 deemed to have come into operation on 1 March, 2019.]
Provided that the employee is not, in fulfilling the conditions of their employment contract during any month, mainly involved in the activity of studying, unless the employer and employee have entered into a learning programme as defined in section 1 of the Skills Development Act, 1998 (Act No. 97 of 1998), and, in determining the time spent studying in proportion to the total time for which the employee is employed, the time must be based on actual hours spent studying and employed.
[S. 6 amended by s. 59 (1) of Act No. 20 of 2021 with effect from 1 March, 2022 and applicable in respect of years of assessment commencing on or after that date.]
Part III
Determining amount of employment tax incentive
7. Determining amount of employment tax incentive.—

(1) During each month, commencing from 1 January 2014, that an employer employs a qualifying employee, the amount of the employment tax incentive available to that employer is the sum of the amounts determined in respect of each qualifying employee of that employer stipulated in subsections (2) and (3) and section 9.
[Sub-s. (1) substituted by s. 95 (1) (a) of Act No. 15 of 2016 and by s. 92 (1) of Act No. 17 of 2017 with effect from 1 March, 2017.]

(2) During each month of the first 12 months in respect of which an employer employs a qualifying employee, the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is—
(a) less than R2 000, is an amount equal to 75 per cent of the monthly remuneration of the employee;
(b) R2 000 or more but less than R4 500, is an amount of R1 500;
(c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following formula:
X = A – (B x (C – D))
in which formula—
(i) “X” represents the amount of the monthly employment tax incentive that must be determined;
(ii) “A” represents the amount of R1 500;
(iii) “B” represents the number 0,75;
(iv) “C” represents the amount of the monthly remuneration of the employee; and
(v) “D” represents the amount of R4 500; or
[Para. (c) amended by s. 95 (1) (d) of Act No. 15 of 2016 and by s. 5 (1) (b) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019. Sub-para. (v) substituted by s. 5 (1) (c) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019.]
(d) R6 500 or more, is an amount of nil.
by s. 95 (1) (e) of Act No. 15 of 2016 and by s. 5 (1) (d) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019.]

(3) During each of the 12 months after the first 12 months that the same employer employs the qualifying employee, the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is—
(a) less than R2 000, is an amount equal to 37,5 per cent of the monthly remuneration of the employee;
(b) R2 000 or more but less than R4 500, is an amount of R750;
(c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following formula:
X = A – (B x (C – D))
in which formula—
(i) “X” represents the amount of the monthly employment tax incentive that must be determined;
(ii) “A” represents the amount of R750;
(iii) “B” represents the number 0,375;
(iv) “C” represents the amount of the monthly remuneration of the employee; and
(v) “D” represents the amount of R4 500; or
[Para. (c) amended by s. 95 (1) (h) of Act No. 15 of 2016 and by s. 5 (1) (f) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019. Sub-para. (v) substituted by s. 5 (1) (g) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019.]
(d) R6 500 or more, is an amount of nil.
Para. (d) substituted by s. 95 (1) (i) of Act No. 15 of 2016 and by s. 5 (1) (h) of Act No. 32 of 2019 deemed to have come into operation on 1 March, 2019.] New rates announced in the Minister of Finance Budget speech and come into operation on 1 March 2022.

(3A) . . . . . .
[Sub-s. (3A) inserted by s. 5 (1) (zG) of Act No. 13 of 2020, deleted by s. 5 (1) (zH) of Act No. 13 of 2020, inserted by s. 5 (1) (zI) of Act No. 13 of 2020 and deleted by s. 5 (1) (zJ) of Act No. 13 of 2020 deemed to have come into operation on 1 December, 2021 and applicable in respect of any remuneration paid on or after that date.]

(4) If a qualifying employee was previously, on or after 1 January 2014, employed by an associated person in relation to the employer that employs the qualifying employee, the number of months that the qualifying employee was employed by the associated person must be taken into account by that employer for the purposes of this section as if that employee had already been employed by that employer for that number of months.

(5) If an employer employs a qualifying employee for less than 160 hours in a month, the 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 number of hours that the qualifying employee was employed and is paid remuneration in respect of those hours by that employer in that month bears to the number 160.

7A. Minister may announce altered amounts.—

(1) The Minister of Finance may announce in the national annual budget contemplated in section 27 (1) of the Public Finance Management Act, 1999 (Act No. 1 of 1999), that, with effect from a date or dates mentioned in that announcement, the amounts stipulated in section 4, 5, 6 or 7 will be altered to the extent mentioned in the announcement.

(2) If the Minister of Finance makes an announcement of an alteration contemplated in subsection (1), that alteration comes into effect on the date or dates determined by the Minister of Finance in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.
[S. 7A inserted by s. 81 (1) of Act No. 34 of 2019 deemed to have come into operation on 20 February, 2019.]

8. Unavailability of employment tax incentive for reducing employees’ tax.— An employer may not reduce the employees’ tax payable by that employer in respect of a month by the amount of the employment tax incentive available to that employer in that month if, on the last day of that month, the employer—
(a) has failed to submit any return as defined in section 1 of the Tax Administration Act on the basis required by section 25 of that Act; or
(b) has any outstanding tax debt as defined in section 1 of the Tax Administration Act, but excluding a tax debt—
(i) in respect of which an agreement has been entered into in accordance with section 167 or 204 of the Tax Administration Act;
(ii) that has been suspended in terms of section 164 of the Tax Administration Act; or
(iii) that does not exceed the amount referred to in section 169 (4) of the Tax Administration Act.

9. Roll-over of amounts.—

(1) Subject to subsection (4) and section 10 (3), if in any month the amount of the employment tax incentive available to an employer exceeds the amount payable by the employer in respect of employees’ tax, the amount of the employment tax incentive by which the employees’ tax may be reduced in the succeeding month must be increased by adding the amount of that excess to the amount of the employment tax incentive that is available in that succeeding month.

(2) If an employer does not reduce employees’ tax in the amount of the employment tax incentive despite that amount being available to that employer, the sum of the amounts by which the employer would have been entitled to reduce employees’ tax must be treated as an excess contemplated in subsection (1) in the first month that the employer reduces employees’ tax in the amount of the tax incentive available to the employer.

(3) If, by virtue of section 8, an employer may not reduce employees’ tax in the amount of the employment tax incentive available to that employer, the sum of the amounts by which the employer would have been entitled to reduce employees’ tax payable by that employer if the employer had not been subject to section 8 must be treated as an excess contemplated in subsection (1) in the first month that the employer is not subject to section 8.

(4) Any amount as contemplated in subsection (2) or (3) on the first day of the month following the end of the period for which the employer is required to render a return in terms of paragraph 14 (3) (a) of the Fourth Schedule to the Income Tax Act, must be deemed to be nil in respect of each qualifying employee employed by the employer on that date.
[Sub-s. (4) deleted by s. 117 (1) of Act No. 43 of 2014, added by s. 96 (1) of Act No. 15 of 2016 and substituted by s. 70 (1) of Act No. 23 of 2020 deemed to have come into operation on 31 July, 2020.]

10. Refund.—

(1) At the end of the period for which the employer is required to render a return in terms of paragraph 14 (3) (a) of the Fourth Schedule to the Income Tax Act, a refund of an amount equal to the excess contemplated in section 9 (1) must be claimed from the South African Revenue Service in the form and manner and at the time and place prescribed by the Commissioner for the South African Revenue Service.

(2) An refund contemplated in subsection (1) must be paid in accordance with section 190(1)(a) of the Tax Administration Act to the employer from the National Revenue Fund and be treated as a drawback from revenue charged to the National Revenue Fund.

(3) Where an employer has claimed the refund in terms of subsection (1), the amount of the excess in respect of the period to which the refund relates must be deemed to be nil in the month immediately following that period.

(4) The refund contemplated in subsection (1) payable to an employer may not be paid to that employer if the employer—
(a) has failed to submit any return contemplated in section 8 (a); or
(b) has any tax debt contemplated in section 8 (b).

(5) Where—
(a) an employer has claimed a refund in terms of subsection (1); and
(b) the refund contemplated in subsection (2) was not paid in terms of subsection (4),
that refund must be paid to an employer during any month in the period for which the employer is required to render a return in terms of paragraph 14(3)(a) of the Fourth Schedule to the Income Tax Act subsequent to the period contemplated in subsection (1) in the first month during that period in which the employer is not subject to subsection (4).

(6) Where a refund contemplated in subsection (2) is not paid by virtue of subsection (4) and (5) that refund must be deemed to be nil at the end of the period contemplated in subsection (5).
[S. 10 amended by s. 118 (1) of Act No. 43 of 2014, by s. 6 (1) (a)-(d) of Act No. 13 of 2020 and by s. 142 (1) of Act No. 25 of 2015 and substituted by s. 30 (1) of Act No. 16 of 2022 deemed to have come into operation on 1 September, 2022, and applicable to any return, for purposes of paragraph 14 (2) of the Fourth Schedule to the Income Tax Act, submitted or after that date.]
(Date of commencement of s.10: 19 December, 2014.)
Part IV
Miscellaneous
11. Reporting.—

(1) The Commissioner of the South African Revenue Service must submit to the Minister of Finance a report in the form and manner and containing the information that the Minister of Finance may prescribe by regulation in the Gazette for the purposes of the monitoring and evaluation of the employment tax incentive.

(2) The Minister of Finance must publish information on the employment tax incentive twice a year.

12. Cessation of employment tax incentive.— An employer may not receive the employment tax incentive after 28 February 2029.
[S. 12 substituted by s. 97 (1) of Act No. 15 of 2016 and by s. 102 of Act No. 23 of 2018.]

13. Amendment of laws.— The laws specified in the second column of the Schedule are hereby amended to the extent set out in the third column of that Schedule.

14. Short title and commencement.—
(1) This Act is called the Employment Tax Incentive Act, 2013.
(2) Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12 and 13 come into operation on 1 January 2014.
(3) Section 10 comes into operation on a date determined by the Minister of Finance in the Gazette.

CLAIMING THE AVAILABLE ETI

10. EMP201 Monthly Return completion
In order to ensure that the calculated ETI are reflected on the SARS account of the employer, the employer must ensure that the monthly EMP201 return is completed correctly.
The following ETI fields are found on the EMP201 return under the column “ETI CALCULATION”:
• ETI brought forward
• ETI calculated
• ETI utilized
• ETI carry forward

Note: The “ETI Brought Forward” and “ETI Carry
Forward” fields are locked as they are programmatically
populated according to the information completed in the
“Calculated” and “Utilised” fields.

If the employer does not complete the ETI calculated and ETI utilised fields correctly, then the ETI excess amounts (if any) will not be recorded and the ETI brought forward and ETI carry forward fields will be incorrect.

Example:
Month PAYE liability ETI BF ETI calculated ETI utilized ETI CF
Mar 1250.00 0.00 1500.00 1250.00 250.00
Apr 1250.00 250.00 250.00 0.00
May 1250.00 0.00 3000.00 1250.00 1250.00
Jun 1250.00 1250.00 1500.00 1250.00 1500.00
Jul 1250.00 1500.00 1500.00 1250.00 1750.00
Aug 1250.00 1750.00 1250.00 500.00
Sep 1250.00 0.00 1500.00 1250.00 250.00
Oct 1250.00 250.00 1500.00 1250.00 500.00
Nov 1250.00 500.00 1500.00 1250.00 750.00
Dec 1250.00 750.00 1500.00 1250.00 1000.00
Jan 1250.00 1000.00 1500.00 1250.00 1250.00
Feb 1250.00 1250.00 1500.00 1250.00 1500.00

The ETI brought forward for March and September is zero due to the beginning of the new reconciliation period.

The employer did not complete the ETI calculated field for the month of April, but add the April ETI calculated in the May EMP201 return.

The employer did not complete the ETI calculated field for the month of August and this calculated ETI for August cannot be added in the subsequent month due to the provisions of section 9(4) which state that if it is not claimed in the same reconciliation period, it is forfeited.

The ETI carried forward at the end of August and February will be refunded by SARS to the employer.

The ETI utilised field for each month may not exceed the PAYE liability for that month.

The sum total of the ETI brought forward and ETI calculated may be claim in a specific month, PROVIDED that the PAYE liability is equal or greater than this total.
Where the PAYE liability is less than this sum total, the claim for the month will be limited to the PAYE liability amount and the excess will be treated as ETI carry forward.

Important rules in respect of ETI claims on the monthly EMP201 return

a) EMP201 not requested on eFiling
When an EMP201 is not yet requested on eFIling, the employer can complete all the relevant ETI fields on the EMP201 without any issues although the rules as discussed must be adhered to.
However, if the employer is not compliant, the ETI UTILISED field will be locked and the employer will not be able to complete this field.

b) EMP201 not submitted (saved) on eFiling
Where an EMP201 was saved on eFiling and the employer need to change any figures on such saved EMP201, the eFiling system will only allow the employer to change the ETI calculated value if such value is more than the value completed on the saved EMP201 if the employer is compliant and the due date of the relevant return is in the future.
If the eFIling system do not allow the changed value, the employer may use the REFRESH HISTORIC DATA button on the EMP201 WORK PAGE in order to reset the values previously completed on the EMP201.

c) EMP201 submitted on eFiling
Where an EMP201 was already submitted on eFIling and the employer need to change any figures on such saved EMP201, the eFiling system will only allow the employer to change the ETI calculated value if such value is more than the value completed on the submitted.
11. EMP501 Reconciliation Return completion
The purpose of the EMP501 reconciliation return is to match the totals of all figures declared on IRP5/IT3(a) certificates during the reconciliation period with the totals declared on the monthly EMP201 returns, such as —
• PAYE declared on tax certificates (code 4102) match with PAYE liabilities on all EMP201’s;
• UIF declared on tax certificates (code 4141) match with UIF liabilities on all EMP201’s;
• SDL declared on tax certificates (code 4142) match with SDL liabilities on all EMP201’s; and
• ETI calculated on tax certificates (code 4118) match with ETI calculated values on all EMP201’s.

 
The PAYE liabilities on the FINANCIAL PARTICULARS portion of the EMP501 is carried forward for each month on the ETI details screen of the EMP501 as the employer is only allowed to reduce the PAYE with the ETI available amount in any specific month.

The PAYE PAYABLE column (last column) on the ETI details screen, is the result of the PAYE liability LESS ETI utlised for that specific month. The total of all ETI on all tax certificates is reflected in the bottom field.

Each tax certificate with ETI values has it separate ETI values for each month and the Total ETI CALCULATED must be equal to the value of code 4118 on the relevant tax certificate.
The PAYE BRS deals with all the validation rules relating to ETI.
12. ETI VALIDATION RULES – PAYE BRS
This section only covers the validation rules according to the SARS PAYE BRS version 22.0 which relates to ETI (outside the COID-19 periods).
Code Field name Description and important rules
3026 ETI indicator • Indicates that the tax certificate contains ETI values
• Value can only be Y (yes) or N (no)
• Not to be printed on the employee’s tax certificate copy
• Only valid if the year of assessment is 201402 or greater
• If the employer SIC7 code is listed in Appendix D of the PAYE BRS then the employer is not a qualifying employer and this code cannot have a Y value if the employee does not qualify with the age test
• Y is only valid if the employee —
o Has a valid SEZ code (7009); or
o Or is not younger than 18 or older than 29; and
o Has a valid ID number/alternate ID; and
o Employment date (3190) is >30/09/2013
3190 ETI employment date • Initial date the employee was employed by the employer or associated employer
4118 ETI calculated • Sum of all calculated ETI amounts for the employee during the relevant reconciliation period
7006 Month indicator • Indicates the month in the reconciliation period
• Value can only be 01-12
• If the employee qualifies for any month in the reconciliation period, then the information for every month in that reconciliation period must be completed (including the non-qualifying months)
7005 ETI qualifying 12 month cycle indicator • Indicates the qualifying month cycle in the 1-24 months for which an employer may claim ETI for a qualifying employee (e.g. 1st 12 month period or 2nd 12 month period)
• 0 should be used if the employee did not qualify for that specific month
• 1 should be used if the specific month falls within the 1st 12 month period (1-12 month counter)
• 2 should be used if the specific month falls within the 2nd 12 month period (13-24 month counter)
• Only applicable if the ETI employment date is >30/09/2013
7009 ETI SEZ code • Code of the SEZ in which the employer operates through a fixed place of business within which the employee mainly renders services to that employer
• Invalid if this SEZ code is not one of the gazetted SEZ’s (appendix E)
7007 ETI hours • Actual hours employed and remunerated
• Value cannot be greater than 160 – If greater than 160, then report 160
7002 ETI monthly remuneration • Actual ETI monthly remuneration paid to the employee for the specific month
7003 Minimum wage • Indicates the minimum wage used by the employer to determine if the employer complies with the “wage test) which is the HIGHER of National minimum wage or Wage regulating measure
• This rate can either be an hourly rate, monthly rate, etc. (same unit used in code 7008 must be used)
• if the employer is exempt from the National Minimum wage AND no wage regulating measure is applicable, zero must be reported
7008 Wage paid • Zero must be reported for non-qualifying months
• Actual wage paid to the employee for a specific qualifying month
• Same unit used under code 7003 must be used for this field (example, if an hourly rate was used, then this must also be an hourly rate)
7004 Monthly calculated ETI • Indicates the amount of the ETI calculated for the specific month for the employee
• If it is the 1st 12 month cycle (month count 1-12), then the value cannot be greater than R1500
• If it is the 2nd 12 month cycle (month count 12-24), then the value cannot be greater than R750

Note: Although only rules relating to ETI directly are covered in this section, the other validation rules relating to tax certificates as specified in the SARS PAYE BRS must be applied to all tax certificates issued by an employer during the reconciliation process.

The draft Bill introducing the Employment Tax Incentive initiative (ETI) was published by National Treasury on 19 September 2013. The Employment Tax Incentive Act No. 26 of 2013 was promulgated on 18 December 2013 and published in the Government Gazette 37185, Notice No. 1032 and came into effect on 1 January 2014.

The Employment Tax Incentive Act gives effect to the announcement by the President in his 2010 State of the Nation Address and Budget that the government will table proposals to subsidise the cost of hiring younger workers.

Due to the fact that many South Africans are excluded from economic activity and as a result suffer from disproportionately from unemployment, discouragement and economic marginalization, government deems it necessary to subsidise the hiring of younger workers. High youth employment means young people are not gaining the skills or experience needed to drive the economy forward which may become a lifelong experience, thereby having long-term adverse effects on the economy.

In response to the high rate of youth unemployment, Government has implemented the ETI incentive mainly aimed at encouraging employers to hire young and less experienced work seekers. Targeting those earning below the personal income tax threshold means that the incentive effectively targets the most vulnerable.

Initially ETI was meant as a temporary programme to stimulate demand for youth workers which would have come to an end on 1 January 2017. However, due to the slow take-up by employers and the high unemployment rate of the youth, the ETI was extended to 28 February 2029.

The main aim of the ETI initiative is to reduce the cost of hiring young people to employers through a cost-sharing mechanism with Government while leaving the wage the employee receives unaffected. It in affect reduces the employers PAYE employees’ tax which is payable when an employer hires a qualifying individual.

The ETI is only applicable to each qualifying individual for a maximum of 24 months (e.g. first 24 qualifying months per qualifying employer from employment date on or after 1 October 2013. Although the qualification looks at the hiring date, it must be noted that SARS introduce a relaxation on this in order to give employers time to take-up get their payroll systems in order and to take-up this incentive.

The incentive also applies within certain Special Economic Zones (SEZ) and designated industries where the age restriction as a qualifying criterion will not apply.

The ETI incentive is administered, monitored and evaluated through the South African Revenue Service (SARS) employees ’tax (PAYE) system.

The following is the News flash 2022-07 published by the PAGSA regarding Final Tax law Changes ETI Overview

OVERVIEW OF THE ETI MONTHLY REMUNERATION CHANGE – EFFECTIVE 1 MARCH 2022

PAGSA Newsflash 2022-03 discussed the general changes made by the 2021 tax amendment Acts that were published on 19 January 2022 and indicated that there were two amendments that are more complicated and that the PAGSA has been following up to get clarity.

We have today been given an opinion by SARS regarding the change to the definition of monthly remuneration in the Employment Tax Incentive Act that is effective from 1 March 2022.

Due to the urgency to get this to payroll suppliers, this Newsflash gives you the proverbial bottom line, and the background detail will be discussed in a Newsflash to follow.

Amendment

The definition of remuneration in the ETI Act has been amended by the insertion of the proviso.
“monthly remuneration’—
(a) where an employer employs and pays remuneration to a qualifying employee for at least 160 hours in a month, means the amount paid or payable to the qualifying employee by the employer in respect of a month; or;
(b) where the employer employs a qualifying employee and pays remuneration to that employee for less than 160 hours in a month, means an amount calculated in terms of section 7(5):

Provided that in determining the remuneration paid or payable, an amount other than a cash payment that is due and payable to the employee after having accounted for deductions in terms of section 34(1)(b) of the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997), must be disregarded;”

Application

Non-cash payments to employees are employer-paid contributions to third party organisations, as well as all taxable fringe benefits in terms of the Seventh Schedule of the Income Tax Act.

These non-cash payments must be excluded from the calculation of ETI monthly remuneration from 1 March 2022.

More Detail

There are some aspects of the broad guidance outlined above for the calculation of ETI monthly remuneration that is with SARS Legal for their opinion.

As soon as feedback is received, another Newsflash will be issued

The following is news flash 2024/17 published by the PAGSA on March 27, 2024 regarding COID Earnings Threshold 2024/2025

COMPENSATION FUND: EARNINGS THRESHOLD FOR 2024 – 2025

After many emails and telephone calls, the Compensation Fund has today published the Earnings Threshold for the 2024/2025 year of assessment in Government Gazette No. 50386 dated 27 March 2024.

The two thresholds are:
1. R568 959 for the actual period of 1 March 2023 to 29 February 2024
2. R597 328 for the forecast period of 1 March 2024 to 28 February 2025.

The notice also includes the minimum assessment amounts for:
1. Domestic Employers: R528
2. All other Employers: R1 530

These minimum assessment amounts are effective from 1 March 2024.

Regards,
Rob Cooper

The following is news flash 2024/19 published by the PAGSA on April 05, 2024 regarding SARS Request: Allowing Employees to access eFiling

SARS REQUEST: ALLOWING EMPLOYEES TO ACCESS EFILING

SARS has issued a request to employers to allow their employees to access eFiling through the employer’s systems.

Please refer to the request below for more details.

Dear Stakeholders

ENABLE YOUR STAFF TO ACCESS SARS ENFILING ON YOUR SYSTEMS

SARS is striving to make it easy for taxpayers to comply with their obligations. As a result, we are automatically assessing a growing number of individual taxpayers. However, some may not have this benefit or, for various reasons, may need access to eFiling to validate the auto-assessments.

SARS has determined that many employees may not have access to the internet and that, given employers’ rules, some systems block access to SARS eFiling.

With this letter, SARS would like to ask you, as a large employer or representative of large employers, to allow your employees to access SARS eFiling through the employer’s systems. Some employees’ only point of intemet access is their work computer, so enabling your employees to transact with SARS online means that they do not have to take time off to visit a SARS branch.
SARS values your support and collaboration.

Sincerely
THE SOUTH AFRICAN REVENUE SERVICE

Regards,
Rhona van Taak

The following is news flash 2024/20 published by the PAGSA on April 05, 2024 regarding SARS: Employer Filing Season for year ending 28 February 2024

SARS: EMPLOYER FILING SEASON FOR YEAR ENDING FEBRUARY 2024

SARS has issued a notice in respect of the 2024 Employer Annual Filing Season.

According to this notice, the filing season will commence on 1 April 2024 and ends on 31 May 2024. This includes all your reconciliation related documents (EMP501 and Tax certificates) for the period 1 March 2023 to 28 February 2024.

Please ensure that your Annual Reconciliation is submitted on or before 31 May 2024.

To access the notice, please click on the link below:

Employer Annual Declarations (EMP501): 1 April to 31 May 2024

Regards,
Rhona van Taak

The following is news flash 2024/05 published by the PAGSA on February 13, 2024 regarding COID: Return of Earnings

SUBMISSION OF THE COID RETURN OF EARNINGS

Return of Earnings Notice

The Acting Director-General of the Department of Employment and Labour issued Government Gazette No. 50109 on 12 February 2024.

The notice was issued in terms of section 82 of the Compensation for Occupational Injuries and Diseases Act to communicate the following information regarding the annual Return of Earnings (ROE) that employers must submit to the Fund in respect of the concluded 2023 year of assessment as well as the coming 2024 year of assessment.

1. The submission period will open on 1 April 2024 and close on 30 June 2024
2. Employers are strongly encouraged to submit their ROE’s by using the ROE Online System platform that can be accessed at [email protected]
3. There is a penalty of 10% (presumably of the assessed amount) for late submissions
4. Interest will be charged on overdue accounts
5. Importantly, it is the employer’s duty to inform the Fund of any changes to the nature of the business, closure of the business, physical or other addresses, contact details, etc. within 7 days of the change.

Note that in the Fund’s terminology, ‘2023’ refers to the year in which March falls, not the year in which February falls, as is the case with tax terminology conventions, and indicates a year of assessment that starts on 1 March 2023 and ends on 29 February 2024.

Maximum Earnings Calculation
The rather confusing Government Gazettes that were issued on 31 March 2023 and 30 May 2023 instructed that the ‘annual’ (as opposed to a ‘monthly) method of calculation must be implemented for (only) the 2022 year of assessment.

However, to align with what we understand the Funds intention to be, payrolls were advised to implement the ‘annual’ method of calculation for 2023 in PAGSA Newsflash 2023-28, and in the absence of any guidance from the Fund since then, I suggest that the same method is applied for the 2024 year of assessment.

The issue of the two Gazettes in 2023 without warning or discussion, and too late to be implemented by payrolls for the 2022 year of assessment, resulted in a number of problems which the PAGSA has been trying to resolve with the Fund.

In this regard, we will be meeting with the Fund shortly, and you will be advised of the outcomes.

Regards,
Rob Cooper

The following is news flash 2024/06 published by the PAGSA on February 14, 2024 regarding SARS Webinar on Digital Channels

SARS INVITATION TO A WEBINAR ON DIGITAL CHANNELS

SARS have issued the following invitation for members who would like to attend this webinar. Details below.

Regards,
Rob Cooper

SARS INVITATION

Dear Colleagues,

The Taxpayer and Trader Education unit will host a webinar on SARS digital channels to assist taxpayers to comply with their tax obligations.

The Digital Channels webinar aims to increase the uptake of digital migration and encourage those who are already registered to utilise the channels by providing education to small, medium and micro enterprises (SMMEs) about these channels.

In line with our strategic objectives, SARS aims to ensure that taxpayers have clarity and certainty about their tax obligations, so that they can be in a better position to do the right thing when it comes to fulfilling their tax obligations and be tax compliant.

The following topics will be covered:
• eFiling for organisations
o How to register on eFiling
o How to manage your profile on eFiling
o Portfolio management
o Registered representatives
o Registering/Adding a taxpayer on eFiling
o Managing groups
o Activating a SARS-registered representative
o Inviting a user and delegating rights
o Tax Compliant Status
• SARS Online Query Services (SOQS)
o What is SOQS?
o Advantages of SOQS
o Services on SOQS
• Frequently Asked Questions

As a SARS ambassador, you are invited to join this webinar to gain information that will aid you when executing your duty. The details of the webinar are as follows:
Date: Thursday, 15 February 2024 Time: 17:00 – 19:00

YouTube: https://youtube.com/live/CJafuxMidf8?feature=share