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Tax Relief Measures to assist businesses
The Minister of Finance has announced the following exceptional tax measures as part of the fiscal package outlined by President Cyril Ramaphosa on 23 March 2020 in his speech on the Escalation of Measures to Combat COVID-19.
These measures are over and above the tax proposals made in the 2020 Budget on 26 February 2020.
The tax adjustments are made in light of the National State of Disaster and due to the significant and potentially lasting negative impacts on the economy from the spreading of the COVID-19 virus. There is a critical need for government interventions to assist with job retention and assist businesses that may be experiencing significant distress.
Proposal to expand Employment Tax Incentive programme
In order to minimise the loss of jobs during this critical period, Government proposes expanding the ETI programme for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 as follows:
- Increasing the maximum amount of ETI claimable during this four month period for employees eligible under the current ETI Act from R1000 to R1 500 in the first qualifying twelve months and from R500 to R1 000 in the second twelve qualifying months.
21 April 2020 A Further increase in the maximum amount of ETI claimable from R1500 to R1 750 in the first qualifying twelve months and from R1000 to R1 250 in the second twelve qualifying months.
- Allowing a monthly ETI claim in the amount of R500 now R750 during this four month period for employees from the ages of:
18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for 24 months; and
30 to 65 who are not eligible for the ETI due to their age.
- Accelerating the payment of employment tax incentive reimbursements from twice a year to monthly as a means of getting cash into the hands of tax compliant employers as soon as possible.
This expansion will, however, only apply to employers that were registered with SARS as at 1 March 2020. Further to the above, the current compliance requirements for employers under sections 8 and 10(4) of the ETI Act will continue to apply.
SKILLS DEVELOPMENT LEVY CONTRIBUTION HOLIDAY
In order to assist with alleviating any cash flow burden arising as a result of the COVID-19 outbreak and lockdown as well as reducing the burden of payroll taxes in the short term,
Government proposes a four-month holiday (non- payment) for skills development levy contributions (1 per cent of monthly payroll) made by employers, beginning 1 May 2020 and ending on 31 August 2020
All employers who are registered for SDL automatically qualify for the SDL Payment Holiday
The SDL payment holiday will be automatically provided. The zero amount SDL Liability will be defaulted on the EMP201 return for the four month period from May to August 2020
Proposal of deferral of the payment of employees' tax liability for tax compliant small to medium sized businesses
Tax measures for tax compliant small to medium sized businesses, for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020:
Deferral of payment of 20 per cent of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
21 April 2020 deferral of payment for PAYE liability increased to 35%
The deferred PAYE liability must be paid to SARS in equal instalments over the six month period commencing on 1 August 2020, i.e. the first payment must be made on 7 September 2020.
For the purposes of this proposal, small or medium sized business is defined to mean any business with an annual turnover not exceeding R50 million.
21 April 2020 increase to include businesses with gross income of R 100 million or less
The above-mentioned proposals will not apply to an employer or representative employer that:
has failed to submit any return as defined in section 1 of the Tax Administration Act, 2011 (TAA) on the basis required by section 25 of the TAA; or
has any outstanding tax debt as defined in section 1 of the TAA, but excluding a tax debt
in respect of which an agreement has been entered into in accordance with section 167 or 204 of the TAA;
that has been suspended in terms of section 164 of the TAA; or
that does not exceed the amount referred to in section 169(4) of the TAA.
However, interest and penalties will apply if the employer has understated the PAYE liability for any of the four months.
Complete the EMP201 as per normal with the full PAYE Liability
Submit the EMP201 to SARS statement of account will reflect the COVID-19 Tax Relief (deferred amount) for PAYE and the total amount payable for that respective period, to you;
Proposal of deferral of the payment of provisional tax liability for tax compliant small to medium sized businesses
Government proposes the following tax measures for tax compliant small to medium sized businesses, for a period of twelve months, beginning 1 April 2020 and ending on 31 March 2021:
Deferral of a portion of the payment to SARS without imposing administrative penalties and interest for the late payment of the deferred amount;
The first provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15 percent of the estimated total tax liability, while the second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65 percent of the estimated total tax liability;
Provisional taxpayers with deferred payments will be required to pay the full tax liability when making the third provisional tax payment in order to avoid interest charges.
For the purposes of this proposal, a small or medium sized businesses is defined as any company conducting a trade with an annual turnover not exceeding R50 million.
21 April 2020 Small or medium sized business qualifying for deferral of provisional tax liability increased to include business with an annual turnover of R 100 million or less.
The above-mentioned proposals will not apply to a provisional taxpayer that:
has failed to submit any return as defined in section 1 of the Tax Administration, 2011 (TAA) as required by section 25 of the TAA; or
has any outstanding tax debt as defined in section 1 of the TAA, but excluding a tax debt
in respect of which an agreement has been entered into in accordance with section 167 or 204 of the TAA;
that has been suspended in terms of section 164 of the TAA; or
that does not exceed the amount referred to in section 169(4) of the TAA.
However, interest and penalties will apply in instances where, upon assessment, it is discovered that a taxpayer does not qualify for relief under the proposed amendments.
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