Employment taxation incentives

1. Introduction

The Minister of Finance presented the 2016-17 National Budget to Parliament on Wednesday 23 June 2016 and introduced a number of budget amendment bills to the House. These bills were debated and enacted by Parliament on Friday 8 July 2016.

2. Employment

The 2016-17 Budget is designed to focus on rehabilitation of public infrastructure including schools, health facilities, and housing. Government believes that the increased expenditure will stimulate economic activity, employment creation, raise consumption levels and provide further impetus for growth.

3. Taxation incentives

To encourage employers to create employment, Government has increased the Employment Taxation Scheme deduction rate of 150% to 200%. The scope of the Scheme is now widened to include apprenticeship in related area of study and employment during holidays. Employers will be entitled to a 200% deduction in respect of an employee’s wages for an employee entering the work force for the first time from 1 August 2016. The wage paid must be the minimum wage payable for the respective sector to qualify for the deduction.

Additionally, an employer will be able to claim a 200 percent tax deduction where a student:

(a) is employed for up to six months in a year prior to graduation as part of a job placement requirement or gaining practical experience prior to graduation; or

(b) works part-time during their studies, in a related area, for up to 3 months in a year. The aim is to encourage students to find part-time work and get some work experience prior to graduation.

Employers will also be able to claim a 150 percent deduction for in-service education for current employees to help them obtain professional qualifications.

The incentives will expire in 2020.

4. Incentives for the employment of disabled persons

Government also announced the extension of the Scheme to specifically encourage the employment of disabled people. A 300 percent tax deduction in respect of wages paid to disabled employees is available to employers provided they continue employment for three continuous years. This incentive will expire in 2022.

5. Conclusion

We await the necessary legislative changes to be introduced to comment on the design and mechanics of the new Employment Tax Scheme.

If you have any questions, please contact Nicholas Barnes, Richard Naidu or Rajnil Krishna.

Disclaimer

The information and opinions in this Legal Alert are for general information purposes only. They are not intended as specific legal or other professional advice and should not be relied upon or treated as a substitute for specific advice. Munro Leys can accept no responsibility for any loss arising from reliance on the general information contained in this Legal Alert.