PKF South Africa

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01 Jul 2016

What is the purpose of The Skills Development Levy (‘SDL’)?

SDL is a levy imposed to encourage learning and development in South Africa and is determined by an employer’s salary bill. The funds are to be used to develop and improve skills of employees. Levies received from employers are paid over to the appropriate Sector Education and Training Authority (‘SETA’). The aim of the SETAs are to ensure that the critical need for skills development in South Africa is met.

Who should register for SDL?

Where an employer expects that the total salaries will be more than R500 000 over the next 12 months, that employer becomes liable to pay SDL.

How is the levy calculated?

It is calculated as 1% of remuneration (including overtime payments, leave pay, bonuses, commissions and lump sum payments) paid to employees during any month (which include directors of a company).  The levy is therefore also applicable to directors’ remuneration.

Even though directors’ remuneration is also subject to the SDL, what should not be forgotten though (especially in the context of what appears to be the focus of SARS’ audits) is that directors’ remuneration is excluded in terms of section 3(5)(e) from determining whether the threshold amount of R500,000 has been reached and which requires registration for SDL purposes (see section 4(b)).

Therefore, although the directors’ remuneration will be subject to SDL once the company is registered, it is ignored for purposes of determining whether a taxpayer is liable, and thus required to register, for SDL.

This is particularly relevant for small and medium enterprises who conduct business through a private company, especially where remuneration is comprised largely of directors’ salaries.  To give an example: assume a private company pays salaries to non-directors of R400,000, and R1,000,000 to the two directors of the company collectively.  On these facts, the company need not register and pay SDL as non-director salaries amount to less than R500,000.  Were the company however to pay salaries to non-directors of R600,000, then irrespective of the directors’ remuneration, the company would need to register for SDL and pay 1% per month on the total remuneration paid to all employees (including directors).

How to claim from my appropriate SETA?

Make sure your business is registered with your appropriate SETA. Appoint a training officer or a skills development facilitator and register this person with the SETA. The training officer will be responsible for identifying the training requirements within the business. According to the training requirements a training plan or Workplace Skills Plan should be drafted and submitted to the SETA.

On a yearly basis an Annual Training Report should be submitted to the SETA, this is the report that specifies compliance with the training plan. If all the necessary requirements are met the employer will qualify for a percentage-based refund on funds contributed to the SDL.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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