Gov't introduces Employment Tax Credit
UNREGULATED companies and self-employed individuals engaged in a trade -- vocation or profession -- will be entitled to claim a non-refundable Employment Tax Credit (ETC) when computing their net income tax liability, effective January 1, 2014.
However, in order to qualify for the credit the eligible persons will have to file and pay their monthly payroll statutory deductions on time.
This move will effectively pull more people into the tax net.
"While the employment tax credit will benefit some businesses, it will also serve to encourage greater tax compliance and boost employment," according to the Tax Administration Department (TAJ).
The amount of ETC which may be claimed in respect of each year of assessment will be equivalent to the total amount of payroll deductions and contributions for Education Tax, National Housing Trust, National Insurance Scheme and HEART, which have both been declared and paid on time for employees during that year.
"Eligible persons are therefore encouraged to file and pay their monthly payroll deductions (S01) on a timely basis in order to benefit when filing their final income tax return," the TAJ said in a release yesterday.
"However, it should be noted that the ETC will be restricted to 30 per cent of the tax chargeable on the company's or trader's income. Additionally, the ETC may not be claimed against any income tax chargeable on non-trading income, such as interest and dividend income. Such income will continue to be liable to tax at 25 per cent," the release said.
The Employment Tax Credit is being introduced as part of the Government's Fiscal Incentive Regime and followed months of discussion by a private sector-led working group, in partnership with representatives of the Ministry of Finance and Planning and the TAJ.