Claiming ETI you forgot in an earlier month
How a South African employer recovers Employment Tax Incentive it failed to claim, why amending the old EMP201 loses it, and the conditions that apply.
By Achekam · · 4 min read · For Running a business businesses in South Africa
It usually comes to light during a review. The bookkeeper is checking the payroll for the half-year and notices that a young employee who started in winter never appeared on the incentive line of the EMP201. Or a whole month went through with no Employment Tax Incentive at all because a setting was blank.
The instinct is to go back to that month and fix it. With the Employment Tax Incentive, that instinct is exactly wrong. SARS has a specific rule for a missed claim, and following the wrong route means the money is lost rather than recovered. This article sets out the rule, the conditions around it, and how to find and document the missed months.
The rule: claim it later, in the same period
SARS says an omitted ETI amount must be claimed in a later month within the same reconciliation period, not by correcting the earlier EMP201. If it is not claimed that way, it is forfeited. SARS attributes the rule to section 9(4) of the Employment Tax Incentive Act, effective from 1 March 2017.
Two parts of that sentence carry the weight.
- "A later month." The missed amount goes onto a future EMP201, alongside that month's own incentive. It is not slotted back into the month where it belonged.
- "The same reconciliation period." There is a window. Once the reconciliation period in which the missed month falls has ended, the opportunity to catch up has gone with it.
SARS explains this on its page on completing the monthly employer declaration (EMP201), which also covers the compliance check made when an EMP201 is requested. It is worth reading before you file the catch-up month.
Why amending the old declaration costs you the claim
It feels tidier to correct the original month, and for many payroll errors correcting is the right approach. For the incentive it is not. Because SARS says the omitted amount must be claimed in a later month and not by correcting the earlier EMP201, an amended declaration that adds the incentive to the original month does not count as the route the Act allows, and the amount is forfeited.
A separate rule applies once the year-end return is in. SARS says that once an employer has submitted the EMP501, corrections are made through the EMP501 and not the EMP201. That rule is about correcting declarations generally, and it is a separate matter from the incentive. If you are correcting PAYE after a reconciliation has gone in, the process is explained in correcting PAYE after the EMP501.
Conditions that can still stop the claim
Even a correctly timed catch-up can fail on conditions that have nothing to do with the missed month.
Tax compliance status. SARS says that when an original EMP201 is requested, its system checks the employer's tax compliance status, and a non-compliant employer cannot offset ETI against its PAYE liability. If an outstanding return or debt has made your status non-compliant, settle that first, or the later month's claim, catch-up included, will not reduce what you pay.
The reconciliation itself. SARS says employers with unused ETI forfeit it if they do not submit their reconciliation or have a non-compliant status. A carefully recovered amount can still be lost if the reconciliation for the period is not submitted.
The employee must have qualified. The catch-up is only for months in which the employee met every condition. Age is the condition everyone remembers, but there are others; they are covered in ETI conditions beyond age.
Finding the missed months in Achekam
In Achekam, the monthly EMP201, including the Employment Tax Incentive, is prepared from approved pay runs and downloaded as a PDF, and the person who files it on SARS eFiling records the reference. The PDFs and recorded references for each month are your trail.
The incentive is worked out per qualifying employee per month once the business enters that year's minimum wage per hour on the tax table. That points to the most common reason a month shows no incentive at all: the minimum wage field was empty when the run was approved. If every EMP201 for a stretch of months shows nothing on the incentive line, check the tax table before looking anywhere else.
A short checklist for the review:
- Lay out each month's EMP201 PDF for the reconciliation period in order.
- For each qualifying employee, confirm they appear on the incentive line in every month they qualified.
- Note any month where they are missing, and why: a late start date captured after the run, a blank minimum wage, an employee record completed after approval.
- Fix the cause first, so the next run is right.
- Agree the catch-up amount with your accountant before the next filing.
Recording the catch-up so the reconciliation makes sense
The catch-up is a decision a person makes and files. Agree the amount with your accountant, include it when you submit the later month's declaration on eFiling, and record SARS's reference against that month as usual.
Then write it down. A short note kept with that month's records should say which employee and which original month the extra amount relates to, how it was worked out, and who agreed it. When the reconciliation is prepared, that month's incentive will be larger than its own payroll explains, and the note is what lets anyone, including SARS, see why.
Act before the period closes
If you suspect a missed claim, check now rather than at year end. The window is the reconciliation period, and every month that passes is one fewer month in which to put it right. Confirm the employee qualified, confirm your compliance status, claim it in the next declaration, and keep the working with the file.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
