- 3 April 2020 – Frequently Asked Questions on Tax Measures (will be updated on a regular basis)
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 . Any excess ETI allowable amount will be refunded. 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.
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.
|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.
What if you don’t agree?
If your status is non-compliant and the refund has been forfeited, but you have proof of having submitted any outstanding returns and paid all outstanding debt, 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.
- ETI not claimed or under-claimed in previous month
- 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 Reconciliation documents are submitted successfully with no discrepancies|
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.
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 [email protected]™ 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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