South Africa: Expansion of employment tax incentive in budget 2022-2023

Proposed expansion of a government-initiated incentive intended to assist in reducing the youth unemployment rate

Proposed expansion in budget 2022-2023

The Minister of Finance on 23 February 2022 announced as part of the budget for 2022-2023 a proposed expansion of the employment tax incentive (a government-initiated incentive intended to assist in reducing the youth unemployment rate).

Background

The employment tax incentive reduces the cost to the employer of hiring young and less experienced workers, by allowing the employer to reduce the amount of employees’ tax (also known as “PAYE” or pay-as-you-earn) that must be remitted to the South African Revenue Service with respect to a qualifying employee’s remuneration.

If an eligible and tax-compliant employer hires a qualifying employee (defined as a person between the ages of 18 years and 29 years and 11 months), the employer can deduct the employment tax incentive amount from the total amount of that employee’s tax payable.

Proposal

In an attempt to further encourage employers to employ young people, it has been proposed that the employment tax incentive benefit be increased by 50%, effective 1 March 2022.

Other proposed changes include expanding the eligibility criteria for qualifying employees in an effort to improve the incentive for small businesses and imposing understatement penalties on reimbursements that are improperly claimed by employers.

Read a February 2022 report [PDF 196 KB] prepared by the KPMG member firm in South Africa

 

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