Cape Town – National Treasury has brought the Taxation Laws Amendment Act of 2024 into effect, introducing changes to several of South Africa’s tax laws, including measures aimed at curbing abuse of the Employment Tax Incentive (ETI).
The legislation was signed into law by President Cyril Ramaphosa and promulgated in December 2024 but had not yet taken effect.
The Taxation Laws Amendment Act makes changes to the Income Tax Act, Value-Added Tax Act and legislation governing various tax incentives.
The ETI was introduced by the government in 2013 to encourage employers to hire young job seekers by reducing the cost of employing young people.
The incentive, which came into effect on 1 January 2014, operates through a cost-sharing mechanism between employers and the government without reducing the wages received by qualifying employees.
The ETI is currently scheduled to expire on 28 February 2029.
However, according to BusinessTech, the government has introduced further changes to the incentive after identifying schemes in which training institutions allegedly exploited the system.
Under some of these arrangements, training institutions claimed the ETI for students who were classified as employees under the legislation but did not receive cash payments directly into their bank accounts.
Instead, the institutions deducted training fees from the students’ wages.
“The misuse of the ETI for creating fictitious employment, primarily to exploit the incentive, contradicts the policy’s intention,” Treasury said.
The latest amendments introduce punitive measures that will require employers found to have abused the incentive to pay penalties to the Treasury.
Treasury said the changes were necessary to protect the original purpose of the ETI, particularly at a time when millions of young South Africans remain excluded from economic participation.
“It is essential to emphasise that millions of young South Africans are excluded from economic participation, resulting in high levels of unemployment, discouragement, and economic marginalisation,” Treasury said.
“The primary purpose of the ETI is to encourage employers to hire young job seekers, providing them with a living wage and valuable work experience for future employability.”
The Taxation Laws Amendment Act also introduces changes in several other areas of the tax system.
These include narrowing certain definitions, clarifying the application of tax rules, particularly in relation to cross-border transactions, and aligning tax legislation with the two-pot retirement system.
The South African Revenue Service (SARS) has also published an explanatory memorandum providing further details on the amendments and their implementation.
The changes form part of broader efforts by Treasury and SARS to strengthen tax administration, close loopholes and ensure that tax incentives are used for their intended purposes.
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Compiled by Glaan Sibuyi
