Trending in Tax — March 31, 2020

By Ernest Marais and Khanyi Nondabula

Treasury steps into uncharted waters– Latest tax developments and tax relief measures for businesses struck by COVID 19.

Expansion of the Employee Tax Incentive Subsidy

• As explained in our previous tax update the employee tax incentive was introduced to promote the employment of young workers earning up to R6500 by providing an incentive for the employee.

• To encourage job retention in light of the ongoing lock down, treasury has increased the incentive claims by R500 per month for the upcoming four months.

• Furthermore the scope of eligible employees has been widened allowing reimbursements for employees who are:
  - 18-29 and no longer qualify for the ETI due to the employers claims in relation to those employees for the past 24 months;
  - 30-65 and not eligible as a result of their age.

• These reimbursements shall be paid to the taxpayer monthly as opposed to bi-annual payments to assist cash strapped employers.

• The relief will come into effect from 1 April 2020 till 31 July 2020 and shall only be applicable to employers that were registered with SARS as at 1 March 2020.

• This subsidy is estimated to provide assistance to beyond four million employees.

Deferral of the Payment of Employees’ Tax Liability for SMEs

• It is trite that the COVID 19 pandemic shall affect the cash flow of small to medium sized business (with an annual turnover not exceeding R50 million), treasury has responded by introducing a deferral of employee tax liability payable.

• Commencing on 1 April to 31 July 2020 SARS will allow for a deferral payment of 20% of the PAYE liability sans any penalties or interest for.

• The deferred liability shall be payable in equal instalments over the 6 month period beginning 1 August 2020.

• As expected, these relief measures shall only be afforded to tax compliant businesses.

Deferral of the Payment of Provisional Tax Liability for Tax Compliant SMEs

• Provisional tax payments based on the taxpayer’s annual income estimates or the SARS commissioner’s estimates, considering the cash flow issues which emanate from COVID 19, treasury has introduced payment plans to alleviate the cash flow difficulties.

• Commencing on 1 April 2020 treasury has proposed the following tax measures:
  - SARS will allow for a deferral of a portion of the first and second annual provisional liability without the imposition of interest or penalties.
  - The initial provisional tax payment due from 1 April 2002 to 30 September 2020 shall be based on 15% of the estimated tax liability; the second provisional tax payment (due from 1 April 2020 to 31 March 2020) shall be based on 65% of the estimated liability.
  - No interest or penalties shall be payable for taxpayers with deferred payments if the full tax liability is made upon the third payment.

You can read more on the COVID-19 tax measures by implemented by the National Treasury here.