Deferral Of The Payment Of Employees’ Tax Liability For Tax Compliant Small To Medium Sized Businesses
In order to assist with alleviating any cash flow burden 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 limited period of four months, beginning 1st April 2020 and ending on 31st July 2020:
- Deferral of payment of 20% of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
- The deferred PAYE liability must be paid to SARS in equal installments over the six month period commencing on 1 August 2020, i.e. the first payment must be made on 7th 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. 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. The proposed amendments are deemed to have come into operation on 1st April 2020 and end on 31st January 2021.
Should you have any queries please do not hesitate to contact us for professional advice in this regard.
Expansion Of The Employment Tax Incentive (ETI) Age Eligibility Criteria And Amount Claimable
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 1st April 2020 and ending on 31st 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 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 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 1st March 2020. The proposed amendments will apply for a period of four months and are deemed to have come into operation on 1st April 2020 and end on 31st July 2020.
Should have any queries in this regard please do not hesitate to contact us in this regard.
Deferral Of The Payment Of Provisional Tax Liability For Tax Compliant Small To Medium Sized Businesses
In order 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 1st April 2020 and ending on 31st March 2021:
- Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing administrative penalties and interest for the late payment of the deferred amount;
- The first provisional tax payment due from 1st April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability, while the second provisional tax payment from 1st April 2020 to 31st March 2021 will be based on 65% 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. The eligibility criteria for individuals carrying on a business have yet to be finalised, but one possibility is that they will be eligible if their turnover is less than R5 million and no more than 10% of their turnover is derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.
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.
Should you require any assistance in this regard please do not hesitate to contact us for professional advice in this regard.
Tax Measures To Combat The Covid-19 Pandemic
The Minister of Finance has announced the following exceptional tax measures as part of the fiscal package outlined by President Cyril Ramaphosa on 23rd 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. These measures include:
- 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. This will help over 4 million workers;
- The South African Revenue Service to accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to get 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. This intervention is expected to assist 75 000 small and medium term enterprises
The measures will take effect from 1 April 2020. Together with the Commissioner of SARS, National Treasury will also be considering additional exceptional adjustments to assist with COVID-19 relief efforts and to the tax treatment of newly formed funds in this regard.
We will keep you posted of developments in this regard.
Sincerely,
