COVID-19 Tax relief measures

In light of the current COVID-19 pandemic, President Cyril Ramaphosa announced certain relief measures in an attempt to provide for the wellbeing of the people of South Africa and navigate our already troubled economy through these uncertain times.

In order to assist with alleviating cash flow burdens arising as a result of the COVID-19 outbreak, Government has instituted the deferral of a portion of employees’ tax payments, as well as provisional tax liabilities to SARS, without SARS imposing administrative penalties and interest for the late payment of the deferred amount.

Employees’ tax

• Employers may pay only 65 per cent of employees’ tax due, with respect to amounts deducted or withheld during the period commencing on 1 April 2020 and ending on 31 July 2020.
• The remaining amount of 35 per cent of employees’ tax due, with respect to amounts deducted or withheld during the period stipulated above, must be included in the gross employees’ tax due by the employer in six equal monthly instalments, commencing on 7 September 2020 and ending on 5 February 2021.

Provisional tax

• The first provisional tax payment, due from 1 April 2020 to 30 September 2020, will be based on 15% of the estimated total tax liability.
• The second provisional tax payment, from 1 April 2020 to 31 March 2021, will be based on 65% of the estimated total tax liability.
• Provisional taxpayers who elect to defer payments will be required to pay the full tax liability when making their third provisional tax payment in order to avoid interest charges.

Important to note: These tax relief measures will only apply to qualifying taxpayers which is defined as:

A company, trust, partnership or individual —

1. That is a taxpayer as defined in section 151 of the Tax Administration Act (‘TAA’) and conducts a trade;
2. That has a gross income of R100 million or less during the year of assessment ending on or after 1 April 2020 but before 1 April 2021;
3. Whose gross income for the year of assessment does not include more than 20% income derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer; and
4. That is tax compliant as referred to in section 256(3) of the TAA when relying on a deferral as stipulated above.

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.

FURTHER TAX MEASURES TO COMBAT THE COVID-19 PANDEMIC

The following set of additional measures have also been implemented and will help businesses focus on staying afloat and paying their employees and suppliers.

Skills development levy holiday: From 1 May 2020, there will be a four-month holiday for skills development levy contributions to assist all businesses with cash flow.

Fast-tracking of value-added tax (VAT) refunds: VAT vendors that are in a net refund position will be temporarily permitted to file monthly instead of once every two months, thereby unlocking the input tax refund faster and immediately helping with cash flow.

An increase in the expanded employment tax incentive amount: The tax measures provide for a wage subsidy of up to R750 per month for each employee that earns less than R6 500 per month.

Case-by-case application to SARS for waiving of penalties: Larger businesses (with gross income of more than R100 million) that can show they are incapable of making payments due to the COVID-19 disaster, may apply directly to SARS to defer tax payments without incurring penalties. Similarly, businesses with gross income of less than R100 million can apply for an additional deferral of payments without incurring penalties.

We invite you to contact our Tax Department should you have any further inquiries regarding any tax relief measures. You can contact us at 021 840 1600 / tax@asl.co.za.