1. An increase, Expansion and Acceleration of the Employment Tax Incentive (ETI)
- Effective 01 April 2020, the amount of Employment Tax Incentive (ETI) claimable for employees eligible under the current ETI Act will be increased by R500 per month, so the maximum amount claimable rises from R1000 to R1500 in the first qualifying 12 months, and from R500 to R1000 per month in the second qualifying 12 months. As announced by National Government on 29 March 2020, these exceptional tax measures including the expansion of the ETI programme will be for a limited four-month period, beginning 01 April 2020 and ending 31 July 2020.
- A monthly ETI claim for the amount of R500 will be expanded and made available during this four-month period for employees:
- From the age of 18 to 29 who are no longer eligible for the ETI on the basis that the employer has already claimed the ETI in respect of those employees for 24 months; and
- From the age of 30 to 65 who are not eligible for the ETI due to their age.
- South African Revenue Services (SARS) has indicated that it will accelerate the payment of employment tax incentives reimbursements from twice a year to monthly, thereby ensuring constant cash flow to businesses.
Are there any qualifying criteria for the revised COVID-19 ETI programme?
- Yes, only businesses/employers that were registered with SARS as at the 1 March 2020 will qualify. The rest of the criteria will remain the same as stipulated under the prior ETI programme.
2. Employees Tax Relief
Deferral of the Payment of Employees Tax Liabilities (PAYE) for Tax Compliant Businesses
- As announced by President Ramaphosa on 21 April 2020, the turnover threshold for tax compliant businesses for tax deferrals has been increased to include those with an annual turnover of R100 million or less – up from R50 million or less as previously announced. Further, the proportion of the payment of employees tax liabilities (PAYE) for the said tax compliant businesses that can be deferred will be increased to 35% – up from 20% previously – over the next four months without any administrative penalties or interest being imposed for late payment.
- Businesses with a turnover of more than R100 million per annum can apply directly to SARS and will be conducted on a case-by-case basis for deferrals of their tax payments.
- The deferred PAYE liability must be paid to SARS in equal instalments over a 6-month period, commencing on the 1 August 2020. i.e. first payment to be made on the 7th September 2020.
What are the required criteria that allow businesses to qualify for the PAYE deferral?
- The qualifying criteria for the PAYE deferral scheme are as follows:
- Only businesses with an annual turnover of R 100 million or less will be considered.
- Will not apply to any businesses who have failed to submit any tax return.
- Has any outstanding tax debt.
- The following tax debt will be exempted:
- Tax debt of which an agreement has been entered into in accordance with section 167 of the Tax Administration Act;
- That has been suspended.
- That does not exceed the amount referred to in 169 (4) of the Tax Administration Act.
What date did the PAYE tax deferral proposal come into effect?
- The PAYE tax deferral came into effect 1 April 2020 and will end on 31 January 2021.
3. Provisional Tax Relief
Deferral of the Payment of Provisional Tax Liability for Tax Compliant Businesses
Recognising the key role that SMMEs play in stimulating economic activity, job creation, as well as poverty alleviation amongst other factors, part of the special tax measures announced in late March, was aimed specifically at assisting tax compliant businesses over the period of disruption related to the virus, as well as to alleviate cash flow burdens.
Effective 01 April 2020 until 31 March 2021, these special tax measures include the following:
- Deferral of a portion of the first and second provisional tax liability payments to SARS without any administrative penalties or interest for the late payment of the deferred amount;
- The first provisional tax payment for the period 1 April 2020 -30 September 2020 will be based on 15% of the estimated total tax liability, while the second provisional tax payment will be based on 65% of the estimated total tax liability; and
- 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.
What are the qualifying criteria for the deferred provisional tax liability?
The deferred provisional tax liability criteria are as follows:
- A possible key change to these eligibility criteria relates to the annual turnover threshold, as announced by President Ramaphosa on 21 April 2020. Under the exceptional tax measures originally announced by National Government in late March 2020, this threshold was only for SMME’s with a turnover of R50 million or less per annum. President Ramaphosa announced on 21 April however “To assist a greater number of businesses, the previous turnover threshold for tax deferrals is being increased to R100 million a year, and the proportion of PAYE payment that can be deferred will be increased to 35 percent.”
- As stated above, it is unclear at this stage whether this pertains only to the PAYE deferral, or to the deferral of provisional tax too as originally announced in the COVID-19-related exceptional tax measures. This page will be updated as soon as this has been clarified.
- No allowance has been made for sole proprietorship/individuals at this stage, but seemingly, these businesses will qualify if their turnover is less than R5 million per annum and no more than 10% of their income is derived from interest, dividends, foreign dividends, rental and remuneration received from an employer. This will be confirmed at a later date.
- The relief will not be considered for those businesses who have:
- failed to submit any tax return as defined in section 1 of the Tax Administration Act, 2011 (‘the TAA’) as required by section 25 of that Act.
- any outstanding tax debt as defined in section 1 of the TAA, but excluding a tax debt:
- in respect of 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 169 (4) of the TAA.
When did the deferred provisional tax liability come into effect?
- The provisional tax liability measures came into effect on 1 April 2020 and apply to the first provisional tax period ending on or after 1 April 2020, but before 1 October 2020, and the second provisional tax period ending on or after 1 April 2020 but before 1 April 2021.
4. Relief measures for importers of essential and eligible goods?
SARS has implemented a VAT exemption on certain essential goods and a customs rebate on qualifying critical goods. For more information click here.
5. Additional Tax Measures
What additional tax relief measures have been set in place to assist businesses?
- In addition to the tax measures mentioned above, the national government will introduce a 4-month holiday for companies’ skills development levy contributions, fast-tracking VAT refunds and a 3-month delay for filing and first payment of carbon tax.
- Taxpayers who donate to the Solidarity Fund will be eligible to claim up to an additional 10% as a deduction from their taxable income.