https://www.polity.org.za
Deepening Democracy through Access to Information
Home / Covid-19 News RSS ← Back
fasken
Africa|Business|fasken|Flow|Rental|Flow|Operations
Africa|Business|fasken|Flow|Rental|Flow|Operations
africa|business|fasken|flow-company|rental|flow-industry-term|operations
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Sponsored by

Close

Article Enquiry

Tax Relief Measures Introduced To Curb The Effect Of The Covid-19 Pandemic In South Africa

Close

Embed Video

Tax Relief Measures Introduced To Curb The Effect Of The Covid-19 Pandemic In South Africa

Tax Relief Measures Introduced To Curb The Effect Of The Covid-19 Pandemic In South Africa

6th May 2020

ARTICLE ENQUIRY      SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

On 1 April 2020, the Minister of Finance published two draft pieces of legislation that introduced tax measures to alleviate cash flow burdens on tax compliant small to medium sized businesses, arising as a result of the effects of the Covid-19 pandemic and the national lockdown.  

These draft pieces of legislation are the Draft Disaster Management Tax Relief Bill (“the Tax Relief Bill”) and the Draft Disaster Management Tax Relief Administration Bill (“the Tax Relief Administration Bill”).  While these draft bills were published for public comment, they are deemed to have come into operation on 1 April 2020.

Advertisement

The Tax Relief Bill and the Tax Relief Administration Bill defer payments of Employee Tax, interim payments of micro business and extend time periods for a number of functions set out in the Tax Administration Act, 2011.  They also make amendments to Provisional Tax and the Employment Tax Incentive.  They further introduce ways to deal with payments made to the Covid-19 Disaster Relief Trust.  

In this note, we explain the changes made to employee tax, provisional tax, the employment tax incentive and interim payments of micro business.  We also provide clarity on the tax consequences of the benefits received in terms of the Covid-19 Temporary Relief Scheme, 2020 and payments made to the Covid-19 Disaster Relief Trust.  

Advertisement

Deferred payments of PAYE

An employer is required to deduct or withhold employee tax from an employee’s remuneration and pay the amount to SARS within seven days after the end of the month during which the amount was deducted or withheld. 

The Tax Relief Administration Bill allows taxpayers to defer payment of 20% of the employee tax withheld from its employees’ remuneration between 1 April and 31 July 2020.  A taxpayer is required to only pay over 80% of the employee tax to SARS within the seven-day period.  

Provision is made for the deferred payment to be paid to SARS over a period of six months from September 2020.  The 20% of the employees’ tax for the three months should be included in the taxpayer’s gross employees’ tax and paid to SARS in six equal monthly instalments, commencing  7 September 2020 and ending  5 February 2021.  

SARS will not levy any penalties or interest on any of the deferred amounts provided that they are paid in accordance with the provisions of the Tax Relief Administration Bill.  

Reduction of provisional tax

The Tax Relief Administration Bill has reduced the amount of provisional tax that a registered provisional taxpayer may pay. 

A registered provisional taxpayer, who complies with the requirements set out below, may make provisional payments in the following proportions: 

  • during the period 1 April 2020 and 30 September 2020, 15% (rather than 50%) of their total estimated liability, as their first provisional payment which is due within six months from the commencement of the year of assessment; 
  • during the period 1 April 2020 and 31 March 2021, 65% (rather than 100%) of their total estimated liability calculated in accordance with paragraph 17 of the Fourth Schedule for normal tax in respect of that year, as their second provisional payment which is due on the last day of the year of assessment.

The provisional tax amount deferred must be paid on the effective date as defined in section 89quat of the Income Tax Act, 1962 (“the ITA”), being within six or seven months after the last day of the year of assessment depending on the specific taxpayer. 

Importantly, no penalties or interest, other than interest in terms of section 89quat of the ITA, will be levied on the deferred amount of provisional tax.

To qualify for the deferral of PAYE and provisional tax payments, taxpayers must comply with the following requirements: 

  • They must be registered with the SARS as taxpayers by 1 March 2020;
  • They must have a gross income of R50 million or less during the year of assessment ending on or after 1 April 2020 but before 1 April 2021;
  • Their gross income for the year of assessment does not include more than 10% income derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer; and
  • They must be fully tax compliant.

Deferral of interim payments

A registered micro business may make interim payments in the same proportion as set out in relation to provisional tax, i.e. 15% (rather than 50%) of the tax payable in terms of paragraph 11(1) of the Sixth Schedule to the ITA and 65% (rather than 100%) in respect of interim payments, payable in terms of paragraph 11(4) of the Sixth Schedule.  The deferred amount will be payable on a date determined in a notice of assessment.

Amendments to the employment tax incentive ("ETI") 

The maximum amount claimable from April to July 2020 in terms of the Employment Tax Incentive Act, 2013 will be increased from R1000 to R1500 during the first qualifying 12 months and from R500 to R1000 in the second qualifying 12 months, if these periods fall within the four-month period stipulated above. 

A further flat amount of R500 will be claimable for employees between the ages of 30 and 65 who would otherwise qualify for the ETI and secondly for employees between 18 and 29, who no longer qualify for the ETI, due to the fact that their employer has claimed the ETI for the full period of 24 months, for remuneration paid between April to July 2020.

SARS will further increase the payment of ETI reimbursements from twice a year to monthly in order to assist employers with their cash flow.

Deduction of amounts paid to the Covid-19 disaster relief trust

Taxpayers who make any payments to the Covid-19 Relief Trust (defined in the Tax Relief Bill as ‘any trust established for the sole purpose of disaster relief in respect of the Covid-19 pandemic’) before 31 July 2020, will be deductible in accordance with section 18A of the ITA.

Tax consequences of the benefits received in terms of the Covid-19 Temporary Relief Scheme, 2020 

The South African government has put several measures in place to assist employers during the Covid-19 pandemic.  Most notably, the Covid-19 Temporary Relief Scheme, 2020 (“C19 TERS”) is available to employers whose operations have closed fully or in part as a result of the Covid-19 pandemic.

This is a benefit which the employer must apply for and it is paid to the employer to enable it to make payments to its employees.  It is the employer therefore who administers this benefit.  The Unemployment Insurance Fund (“UIF”) will cover the cost of salaries of an employer during the temporary closure of the employer’s business as a direct result of the Covid-19 pandemic.  The amounts to be paid will be determined in accordance with the income replacement rate sliding scale as provided for in the Unemployment Insurance Act, 2001 (“the UI Act”).  The amounts paid to the employer may not be utilised for any other purpose and will not form part of the employer’s assets. 

Despite the employer administering the benefit on behalf of the UIF, no amounts received by the employer will be received on its own behalf and for its own benefit and must not be included in its taxable income and no tax will be payable thereon.  Conversely the employer will not be able to deduct such amounts as it did not actually incur any expenditure. 

Any benefit or allowance paid to a person in terms of the UI Act is exempt from normal tax.  

An amount paid to an employee in terms of the C19-TERS will accordingly be exempt from income tax.  No employees’ tax must further be withheld from the amount paid in terms of the C19-TERS as this amount is not remuneration.

Written by Daphney Willem and Johan Coertze, reviewed by Conor McFadden, Fasken

EMAIL THIS ARTICLE      SAVE THIS ARTICLE ARTICLE ENQUIRY

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options
Free daily email newsletter Register Now