The South African Government has provided additional tax relief measures to assist individuals that may be experiencing significant distress as a direct result of COVID-19.
The relief measures are:
An increase, Expansion and Acceleration of the Employment Tax Incentive (ETI)
- 01 April 2020, the amount of Employment Tax Incentive (ETI) claimable for employees eligible – i.e. earning less than R6,500 – under the current ETI Act was increased by R500 per month for each employee. However, as announced by National Treasury on 23 April 2020, this amount has now been increased by R750 per month per employee (up from the previous R500 increase announced). Therefore, the maximum amount claimable rises from R1000 to R1750 in the first qualifying 12 months, and from R500 to R1250 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 R750 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:
- As clarified by National Treasury on 23 April 2020, the gross income threshold for both deferrals (i.e. PAYE and Provisional Tax) will be increased from R50 million or less to R100 million or less per annum.
- Larger businesses (with a gross income of more than R100 million) that can show they are incapable of making payment due to the COVID-19 disaster, may apply directly to SARS to defer tax payments without incurring penalties
- 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. Case-by-case application to SARS for waiving of penalties:
- Larger businesses (with a gross income of more than R100 million) that can show they are incapable of making payment due to the COVID-19 disaster, may apply directly to SARS to defer tax payments without incurring penalties. Similarly, businesses with a gross income of less than R100 million can apply for an additional deferral of payments without incurring penalties.
- How to apply for waiving of penalties for tax debt:
- Larger businesses (with a gross income of more than R100 million) that are incapable of making payment due to the COVID-19 disaster, may apply to defer tax payments without incurring penalties by emailing SARS on COVID19IPAaboveR100m@sars.gov.za
- Similarly, businesses with a gross income of less than R100 million can apply for an additional deferral of payments without incurring penalties by emailing SARS on COVID19IPAbelowR100m@sars.gov.za
- For more information on the requirements and documents to include in the application, click here.
5. 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.
6. Additional Tax Measures Set in Place to Assist Businesses
What additional tax relief measures have been set in place to assist businesses?
- Skills Development Levy holiday: In addition to the tax measures mentioned above, the national government will introduce a 4-month holiday for companies’ skills development levy contributions (around 1% of total salaries) starting on the 1 May 2020, so as to assist all businesses with cash flow.
- Fast-tracking VAT refunds: Small Vat vendors who are in a net refund position will be temporarily permitted to file monthly as opposed to once every 2 months, thereby releasing the input tax refund quicker and assisting with cashflow. SARS is currently implementing a system which they endeavour to be up by May 2020 for category A vat vendors who would otherwise only file in June 2020.
- 3-month deferral for filing and first payment of carbon tax liabilities: The first filing and payment of carbon tax have been extended from 1 July 2020 to 31 October 2020. This will provide cashflow relief of up to R2 billion.
- Deferred payments of excise tax on tobacco and alcohol: Payments of excise duties on alcoholic beverages and tobacco products due in May and June 2020 will be deferred by 90 days for excise compliant businesses. This is expected to provide cash flow relief of up to R6 billion.
- Postponing the implementation of some Budget 2020 measures: In the 2020 Budget, the Minister of Finance announced some measures to broaden the corporate tax base such as a) restricting net income expense deductions to 30% of earnings and b) limiting the use of assessed loses carried forward to 80% of taxable income. Both these measures were to be effective for years commencing on or after 01 January 2021 but have now been postponed to at least 1 January 2022.
Please click here to view SARS latest tax relief measures.
For the revised Draft Disaster Management Tax Relief Bill, published on 01 May 2020 please click here.