What is the Employment Tax Credit (ETC)?

What is the Employment Tax Credit (ETC)?

The Employment Tax Credit (ETC) provides unregulated companies and self-employed companies, a tax credit amounting to a maximum of 30% of the accumulated employers’ portion of the statutory deductions for both new and existing employees. The ETC is calculated within the year that the company’s tax liability is assessed and is specific to the statutory deductions had been paid on time and in full, on a monthly basis.

Regulated companies, as well as companies that are either benefiting under one of the Legacy Incentives or under one of the other retained legislated incentives are not eligible for the ETC.

Where the full 30% ETC is applied, the company’s effective corporate income tax rate will amount to 17.5%, as opposed to the default headline tax rate of 25%.

The eligible payroll statutory contributions are:

  • Education Tax
  • National Housing Trust (NHT) Contributions
  • National Insurance Scheme (NIS) Contributions
  • Human Employment And Resource Training (HEART) Contributions

Pay-As-You-Earn (PAYE) income tax is not eligible for credit.

The benefit of ETC cannot be applied to non-trading income, e.g. dividends, nor is it refundable and it cannot be carried forward (or back). 

Companies that operate under the grandfathered Legacy Incentives or any of the four (4) incentives legislation that were not repealed are not eligible for the ETC.

Where a company applies the ETC on ineligible income the ETC Claw Back Mechanism will be employed. Any claw back of ETC will not exceed the aggregate ETC claimed by the company.