COVID-19: Tax Measures in Response to Covid-19 Pandemic

If you have not already seen our President’s address to the nation last night, it is well worth a watch:

https://www.enca.com/news/livestream-president-ramaphosa-addresses-nation

I was impressed to hear that the “track and trace” process will continue and that there will be expanded testing.  All of this at a time when our Statistics remain in the “lower leagues” on the world table – for once, that is a good thing!  He also was clear about the very real hardship and pain that this lock-down is causing, and will continue to cause.  There was news of sizable donations by individuals and corporates, including one for medical and personal protective equipment.  What really struck me is the President’s profound love and concern for the people of our country, and my sense was that in his heart every life lost counts. 

The hardships experienced through this crisis are very real and it is important we keep a view to a life beyond the immediate storm.

On a more practical note, today we share information on the tax measures announced by the Ministry of Finance.  Clive Stewart has prepared another summary of these measures, which is set out below.  The Provisional Tax and Employees Tax measures are only applicable to small and medium enterprises with a turnover of less than R50 million whose existing status is tax compliant. It must be emphasised that the new measures are only applicable from 1 April 2020.  Accordingly, any amounts that are due for periods ending up to 31 March 2020 must be paid in full.  

For qualifying clients for whom we provide income tax and/or payroll services, these measures will be taken into account by our team when working on the relevant returns.

Have a great day!

Kind regards

Peter

STRATEGIC BUSINESS SUPPORT

COVID-19: Tax measures in response to Covid-19 Pandemic

By Clive Stewart, Chartered Accountant (SA)

In response to the COVID-19 pandemic, and as part of the fiscal package outlined by President Cyril Ramaphosa on 23 March 2020, the Minister of Finance announced the following exceptional tax measures to assist businesses:

Deferral of payment of Provisional Tax

For a period of twelve months (from 01 April 2020 to 31 March 2021), businesses with a turnover of less than R50 million per annum will be entitled to defer a portion of the payment of their first and second provisional tax liabilities to SARS without incurring interest and penalties from SARS. The first provisional tax payment due from 01 April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability, while the second provisional tax payment from 01 April 2020 to 31 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. 

Note:

The initiative will not apply to taxpayers that have:

  • failed to submit any SARS-related tax return (income tax, VAT, estate duty, etc.); or
  • Any outstanding tax debt.

Deferral of payment of Employees’ Tax

For a period of four months (from 01 April 2020 to 31 July 2020), businesses with a turnover of less than R50 million per annum will be entitled to defer 20% of their employees’ tax (PAYE) liabilities without incurring interest and penalties from SARS. The deferred PAYE liability must be paid to SARS in equal instalments over the six month period commencing on 01 August 2020, i.e. the first payment must be made on 7 September 2020.

Note:

The initiative will not apply to employers that have:

  • failed to submit any SARS-related tax return (income tax, VAT, estate duty, etc.); or
  • any outstanding tax debt.

Employee Tax Incentive (ETI) Programme

The ETI programme (that encourages employers to hire young job seekers) will be expanded for four months (from 01 April 2020 to 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:

o   R1,000 to R1,500 in the first qualifying twelve months; and

o    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:

o   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

o   30 to 65 who are not eligible for the ETI due to their age.

In other words, ETI of R500 per month can be claimed for any employee earning less than R6,500 per month.

  • 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.

Note:

The expanded ETI Programme will only apply:

  • In respect of employees earning less than R6,500 per month (the existing requirement for ETI); and
  • To employers that were registered with SARS at 01 March 2020.

More information on the above interventions can found by clicking on the following links:

Tax measures to combat the COVID-19 pandemic; and

Explanatory notes on COVID-19 tax measures.

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