On 23 March 2020, President Ramaphosa announced certain tax relief measures to be made available to employers and employees to ease the financial strains which may be brought on by the Covid-19 virus and accompanying lockdown. These measures have been put to paper in the Draft Disaster Management Tax Relief Bill which was published by the National Treasury on 01 April 2020.
Following is a summary of the tax measures available with requirements setting out which employers and employees will qualify for these measures.
DEFERMENTS OF PAYE AND PROVISIONAL TAX PAYMENTS
There will also be relief in the form of deferments allowed on provisional tax and PAYE payments.
- Provisional tax
The deferment of provisional tax payments will only apply to a Taxpayer if the Taxpayer is tax compliant and the gross income of the Taxpayer does not exceed R50 million annually. Furthermore, the Taxpayer’s year end must be between 01 October and 31 March. This relief is only applicable from 01 April 2020 up until and including 31 March 2021. The provisional taxes for both the first and second periods may be deferred. In terms of this relief, the Taxpayer is only required to pay 15% of its estimated taxable income in its first period and 65% of its taxable income in the second period. The remaining 20% may be paid as a third payment on or before the last business day of the sixth month after year end. These deferred payments will not be subject to penalties or interest. According to the explanatory notes on Covid-19 measures, measures in terms of individuals carrying on a business have yet to be finalised, but they may be eligible if their turnover is less than R5 million and 10 per cent or less of their turnover is derived from interest, local dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.
Employers will be able to defer their PAYE liabilities. Once again, the employer must be tax compliant. The relief will be available from 01 April 2020 up until 31 July 2020 and will only apply to small to medium sized businesses. An employer will be allowed to defer 20% of its PAYE liability for the months of April, May, June and July. Therefor you can defer from 7 May 2020. It is important to note that the employer will still need to pay the full amount of PAYE for the March period on 07 April 2020. The deferred amounts will be required to be paid in six equal monthly instalments, starting 7 September 2020. No penalties or interest will be levied on these deferred payments. It is important to note that understatements of PAYE within this relief period will lead to penalties and interest.
EMPLOYEE DRIVEN RELIEF MEASURES
The Unemployment Insurance Fund
R30 billion has been allocated to the National Disaster Benefit Fund, which will be utilized to pay qualifying Unemployment Insurance Fund (“UIF”) benefits for up to three months. In response to the Covid-19 pandemic, the UIF has two avenues through which to seek relief. The normal UIF benefits and TERS.
- Normal UIF benefits
An employer may claim normal UIF in terms of “reduced or short time”, Illness benefits or Death Benefits. In order for the “reduced or short time” UIF benefits to be claimed, the following requirements must be met:
- The company has ceased operations and closed or implemented reduced working hours;
- Employees are being compensated partially according to hours worked;
- The employer is registered for UIF.
If these requirements are met, benefits payable to the employee will be the difference between what the employer pays and normal UIF benefits payable. There will also be Illness Benefits available in terms of a quarantined employees and Death Benefits in terms of a deceased employees.
The Temporary Employer-Employee Relief Scheme (“TERS”) offers another avenue relief and the benefits in terms hereof are determined differently to normal UIF benefits. To qualify for TERS, the following requirements must be met:
- The employer must be registered for UIF;
- The employer must have ceased operations for three months or less;
- Financial distress must have been suffered by the employer leaving it unable to compensate its employees;
- An employee may only receive COVID-19 benefits in terms of TERS if the total of the benefit together with any additional payment by the employer in any period is not more than the remuneration that the employee would ordinarily have received for working during that period.
- The latter three points must have been directly linked to the Covid-19 pandemic.
If this avenue is used, the employer cannot also claim normal UIF benefits. The benefit paid out by TERS will be capped at a maximum of R17,715 per month per employee and paid in terms of the income replacement sliding scale (38%-60%) as in the Unemployment Insurance Act 63 of 2001. TERS only applies to the cost of employee salaries during the closure of the business.
- The Employment Tax Incentive
The Employment Tax Incentive (“ETI”) is an incentive aimed at encouraging employers to employ younger employees by providing certain rebates according to the number of qualifying employees which are employed. This measure will apply for the period 01 April 2020 to 31 July 2020. The employer must comply with the following requirements for application of relief
- The employer must be a small and medium sized business;
- The employer must be registered for PAYE as at 01 March 2020.
The table hereunder summarizes the additional relief made available during the qualifying period.
|Requirement||Usual ETI reimbursement||Covid-19 additional relief|
|Employee age||18 – 29||18 – 65|
|ETI available in the first 12 months||Maximum R1,000||Maximum R1,500|
|ETI available in the second 12 months||Maximum R500||Maximum R1,000|
|Monthly claim||Not available||R500/month|
|After employee ETI has been exhausted||No additional reimbursement available||R500/month|
Other measures worth mentioning
Additional to the discussed measures above, there are also measures being developed to support the informal sector and grants from the South African Social Security Agency (“SASSA”) are being paid out early. The banking sector has also been provided some relief, such as lower capital requirements. The Compensation Fund will also be compensating employees who have contracted Covid-19 in their workplace. Relief is also being supplied to small and medium sized enterprises, who can apply at The Department of Small Business Development for debt relief if they are in financial distress.
Don’t hesitate to contact Zuydam Konsult if you require assistance in any of the relief measures as discussed above.