MARCH 2020 – SOUTH AFRICA

COVID-19 TAX MEASURES

It is important that employers note the following:

Tax adjustments made in light of the National State of Disaster

Exceptional tax measures have been announced by the Minister of Finance as part of the fiscal package outlined by President Cyril Ramaphosa during the 2020/2021 Budget Speech on 26 February 2020.

The need for government to intervene to assist with job retention, and to assist businesses that may be experiencing significant distress, is critical.

On Sunday, 29 March 2020 the draft explanatory notes on the COVID-19 tax measures were published on the National Treasury website.

The following tax adjustments were announced due to the significant capacity and possible long-lasting negative effect on the economy of the COVID-19 pandemic:

  • The introduction of a tax subsidy to employers of up to R500 per month for the next four months for those private sector employees earning below R6 500 under the Employment Tax Incentive.
  • The South African Revenue Service (SARS) to accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to inject cash into the hands of compliant employers as soon as possible;
  • Tax-compliant businesses with a turnover of R50 million or less will be allowed to delay 20% of their employees’ tax liabilities over the next four months, and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.

Employment Tax Incentive (ETI)

  • The main aim of the ETI programme is to reduce the cost of hiring young people.
  • The ETI programme makes provision for the employer to claim the ETI in respect of a qualifying employee
    • Who is between the ages of 18 and 29; and
    • Has a monthly remuneration of less than R6 500.
  • Currently, the maximum monthly ETI claimable per qualifying employee is limited to R1 000 in the first year of employment and R500 in the second year of employment.
  • Further to the above, the monthly ETI can only be claimed for the first 24 months of the qualifying employee’s employment by an employer or associated institutions.
  • To minimise the loss of jobs during this critical period, Government proposes the following expansion to the ETI programme for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020
  • Increasing the maximum amount of ETI claimable during this four-month period from R1 000 to R1 500 in the first qualifying twelve months and from R500 to R1 000 in the second twelve qualifying months.
  • Allowing a monthly ETI claim in the amount of R500 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 injecting cash into the hands of tax-compliant employers as soon as possible.It is important to note that this expansion will only apply to employers who were registered with SARS as at 1 March 2020.

    Postponement of the payment of employees’ tax liability for tax-compliant small to medium-sized businesses

    • Small to medium-sized businesses are expected to be among the hardest hit as a result of the COVID-19 pandemic.
    • Government proposes measures to assist small to medium-sized tax-compliant businesses to alleviate cash flow problems experienced during this difficult period.
    • The following tax measures are proposed for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020:
      • Postponement of payment of 20% of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
      • The postponed 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.

    Postponement of the payment of provisional tax liability for tax-compliant small to medium-sized businesses

    • To assist with alleviating cash flow burdens arising as a result of the COVID-19 outbreak, 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:
      • Postponement of a portion of the payment of the first and second provisional tax liability to SARS;
      • The first provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15% 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% of the estimated total tax liability;
      • Provisional taxpayers with postponed payments will be required to pay the full tax liability when making the third provisional tax payment to avoid interest charges.

    Please note, the above measures will be given legal effect in terms of two bills to be tabled when Parliament reconvenes later this year. These bills are the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill.

    The draft bills, together with their draft explanatory memorandums, will be published for public comment on the National Treasury and SARS websites by 1 April 2020.

     

    To view the draft explanatory notes, follow the link

 

Contact our legislation team at info@crs.co.za if you require any additional information.
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