Making Training, B-BBEE, & Tax Incentives Work An Illustration Friday, 16 November 2018

Assume Company A Turnover R100 000 000.00 NPAT R 40 000 000.00 LA R 40 000 000.00 Procurement R 10 000 000.00 Employees 200

Legislative / Complience Burdens PAYE (Assumed at 20%) R8 000 000.00 Skills Dev. Levy (1% of LA) R 400 000.00 B-BBEE Targets – Skills Development (Additional 6% of LA) R2 400 000.00 9 Black People on LS 3:1:1:2:1:1 (2.1.2.1) 9 Black Unemployed 3:1:1:2:1:1 (2.1.2.2)

B-BBEE Sollution (9.6/20 = 48% for SD) Combine 2.1.2.1 and 2.1.2.2 by placing 9 Previously Unemployed Black People on Learnerships in Ratio 3:1:1:2:1:1 Score 4 points under 2.1.2.1 Score 4 points under 2.1.2.2 Assume a Training Cost of R30 000 per Learner and a Annual Stipend of R24 000 Score 1.6 points under 2.1.1.1

20.25% Spend for 48% of SD Points B-BBEE Saving Required Spend: R2.4 Million Actual Spend: R486 000 20.25% Spend for 48% of SD Points

Learnership Allowance (IT 180) An allowance which may be deducted from the employer’s income from trade when the employer’s taxable income is determined. Till 1 April 2022 9 Learners on learnerships R40 000 Annual Allowance x 9 = R360 000 R104 400 @ 29% Tax Rate

Other SARS Deductions Both the Training Fees and the Stipend of the Learner are allowable expenditure items that are not effected by the Learnership Allowance R30 000 Training Cost x 9 = R270 000 R24 000 Stipend Spend x 9 = R216 000 R486 000 @ 29% Tax Rate = R140 000

Employment Tax Incentive Reduces the amount of PAYE payable on a monthly basis Can be claimed for a 24 month period Till 28 Feb 2019 9 Qualifying Learners R1 000 x 9 x 12 = R108 000

Real Cost of Training Stipends @ 9xR24 000 R216 000 Training @ 9xR30 000 R270 000 Sub-Total R486 000 Minus LS Allowances R104 400 Minus SARS Deductions R140 000 Minus ITA Deductions R108 000 Total R134 000

ETI Employer Requirements Must be registered for PAYE Not a public or government (All spheres) entity Is not disqualified for displacement (R30 000 penalty per displaced employee)

ETI Employee requirements A SA Citizen or legal Asylum Seeker or Refugee Is 18 to 29 years old Is not a domestic worker Is not a connected person to the employer Was employed in the last 24 months Earns R2000 – R6000

Calculating ETI Identify all qualifying employees Work out the applicable employment period Work out each employee’s “monthly remuneration” Calculate the amount of the incentive per qualifying employee

ETI for 1st 12 Months ETI for 2nd 12 Months Remuneration Determination Amount R0 – R2000 50% R0 – R1000 R2001 – R4000 Fixed at R1000 R1000 R4001 – R6000 R1000 – (50% of (Remuneration – R4000)) R999 – R0 ETI for 2nd 12 Months Remuneration Determination Amount R0 – R2000 25% R0 – R500 R2001 – R4000 Fixed at R500 R500 R4001 – R6000 R1000 – (20% of (Remuneration – R4000)) R49 – R0