EMPLOYMENT TAX INCENTIVE (ETI) REFUND PROCESS

How does it work?

Employers may be refunded the amount of the allowable ETI that wasn't used to reduce the employees’ tax amount payable at the end of each six month reconciliation period (1 March to 31 August and 1 September to 28/29 February).
 
An ETI refund will only be paid if an employer is tax compliant. This means that all tax returns have been submitted and there is no outstanding tax debt, when the Employer Reconciliation documents [EMP501 and IRP5/IT3(a)s] are received and processed by SARS.
 
Top Tip: A non-compliant employer will have until the end of the next reconciliation cycle (1 September to 28 February or 1 March to 31 August for the interim and annual reconciliations) 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, 28 February or 31 August, the ETI refund will be forfeited.
 

How do we as an employer claim a refund?

The amount of ETI allowable decreases the amount of the employees’ tax that is payable by an employer through the Pay-As-You-Earn (PAYE) system or an ETI refund can be paid. The employer must submit an EMP501 declaration at the end of each reconciliation period to claim a refund.  The total ETI refund for each reconciliation period must be paid to the employer if the employer is tax compliant unless the employer advises SARS otherwise. 
 
On submission of the EMP501 for the end of the reconciliation period, all credits not utilised are being refunded as it can’t be carried forward. No action is required from the employer if the employer is tax compliant and the bank account details are in order.
 
If you want to query your refund, please the call the Contact Centre on 0800 00 7277 or go to your nearest SARS branch.
 

How will the refund be done by SARS?

Refunds are paid out via an automated EFT payment to employers using the confirmed bank details on our system. If the bank details are not confirmed, SARS will request the client to go into their nearest SARS branch and update the bank details. Once this is done, SARS will pay the refund into the employers’ account. The ETI refund is paid by SARS into the employer’s bank account if the employer is tax compliant and the employer’s bank account has passed the system validations. Should the bank account fail the system validations, a letter will be issued to the employer advising the employer to visit the nearest SARS Branch to update the banking details.
 
The employer has until the end of the next reconciliation period to correct its non-compliance status. Where the non-compliance is not corrected within this period, the ETI refund will be forfeited.
 
Example: Employer submits EMP501 declaration for August 2014 reconciliation period and qualifies for ETI refund of R8000.  However, the employer is non-compliant due to the outstanding income tax return for 2013 year of assessment. The employer corrects the non-compliance by submitting the 2013 income tax return on 3 December 2014. SARS must pay the refund as soon as the status is corrected.
 
Top tip: SARS will not pay any refund due to the employer if the refund is less than R100 or any amount determined by the Commissioner in the Government Gazette. Such amount shall be carried forward to the following month of the next reconciliation period.
 

What information do we need to provide to SARS?

If SARS requires information from you, the details of what information is needed will be stated. It could vary from employer to employer and could include payroll/salaries information around qualifying employees and the completion of a form which we will issue to you.
  

May the refund (credits) due be used to pay debt?

No. ETI refund will only be paid if the taxpayer is compliant and refund cannot be used to become compliant.
 
Top tip: All employers were issued a letter prior the 28th February advising them that if they are tax non-compliant in any way and as of the end of February 2015 the refund would have been forfeited. Non-compliance includes outstanding debt or outstanding return and applies to any and all taxes.
 
 

What if you don’t agree?

If your status is non-compliant and the refund has been forfeited, but if you have proof of having submitted any outstanding returns and paying before February 2015, you can log a dispute at your nearest SARS branch.  
 

Important facts about refunds 

  • ETI not used by August every year
    • Is the “ETI not Utilised” amount on August Employer Reconciliation Declaration (EMP501
    • This amount won’t be allowed to be carried forward as the “ETI Brought Forward” amount on the September Monthly Employer Declaration (EMP201)
    • The “ETI Brought Forward” amount on the September EMP201 must be zero.
  • ETI Errors 
    • ETI not claimed or under-claimed in previous month
      • Where an ETI amount was not claimed or a lower amount than the qualifying amount was claimed for a specific month, the shortfall must be claimed in the month when the error was realised, provided that the month is in the same reconciliation period. E.g. if ETI was not claimed for the month of May and the shortfall is discovered in July, the shortfall amount must be added to the ETI calculated on the EMP201 for July. If the shortfall is discovered after the August EMP201 return has been submitted, the ETI will be forfeited.
      • ETI not claimed or under-claimed cannot be claimed on the EMP501
      • When ETI is claimed for a previous period, the ETI information on the Employee Tax Certificated (IRP5) for the month in which the ETI is claimed must not be changed to include the ETI information of the previous month. Any ETI not claimed or under-claimed must be added to the month to which it applies. E.g. if ETI was not claimed for the month of May and the shortfall is discovered in July, the shortfall amount must be added to the ETI information for May on the IRP5 certificate.

Top Tips:

  • Except for the March 2014 (201403), the ETI Brought Forward amount for March and September must always be zero.
  • Any ETI Carried Forward amount at the end of the reconciliation periods, [interim (31 August) and annual (28/29 February)] will be refunded, only if the employer is tax compliant.

Example of how to calculate the ETI Refund

An eligible employer has ETI refund at the end of the six month reconciliation period and is fully compliant.
 
 
ETI Brought Forward
ETI Calculated
Total ETI Available to be offset
PAYE Liability
ETI Utilised
ETI Carried Forward
PAYE Payable
March
R0
R100 000
R100 000
R120 000
R100 000
0
R20 000
April
R0
R120 000
R120 000
R80 000
R80 000
R40 000
R0
May
R40 000
R160 000
R200 000
R160 000
R160 000
R40 000
R0
June
R40 000
R90 000
R130 000
R120 000
R120 000
R10 000
R0
July
R10 000
R200 000
R210 000
R190 000
R190 000
R20 000
R0
August
R20 000
R100 000
R120 000
R80 000
R80 000
R40 000
R0
SARS will refund the employer an amount of R40 000 provided the employer is fully tax compliant
September
R0
R100 000
R100 000
R120 000
R100 000
0
R20 000
October
R0
R120 000
R120 000
R100 000
R100 000
R20 000
R0
November
R20 000
R150 000
R170 000
R120 000
R120 000
R50 000
R0
December
R50 000
R150 000
R200 000
R120 000
R120 000
R80 000
R0
January 2015
R80 000
R50 000
R130 000
R100 000
R100 000
R30 000
R0
February 2015
R30 000
R100 000
R130 000
R100 000
R100 000
R30 000
R0
SARS will refund the employer an amount of R30 000 provided employer is fully tax compliant when Feb 2015 Reconciliation documents are submitted successfully with no discrepancies
March 2015
R0
 
 
 
 
 
 
 

Changes to the ETI Calculated amounts

During the interim and annual reconciliation submission periods, employers must send their EMP501 and IRP5/IT3(a)s to SARS.
 
Once received, SARS will verify the “ETI Calculated” amount on the EMP501 against the ETI information provided in the relevant IRP5/IT3(a)s.
 
Should any differences be found, employers will be asked to either correct or clarify these within 21 business days.
 
Any changes made to the “ETI Calculated” amounts, resulting in revised “ETI Utilised” amounts, will be shown on the Employer Statement of Account (EMPSA), which can be requested through eFiling or e@syFile™ Employer.
 
Top Tip: The changes may result in penalties and interest being charged, if the employees’ tax payable wasn't paid in full by the due date.
 
Where an employer benefitted from the ETI incentive and was non-compliant on the last day of the month in which the incentive was used or paid, the “ETI Utilised” amount will be reversed, which may result in penalties and interest being charged, if the employees’ tax payable wasn't paid in full by the due date.
 
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Last Updated: 03/11/2017 1:44 PM     print this page
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