TAX relief measures due to COVID19

National Treasury and SARS are proposing the following set of measures to help businesses focus on staying afloat and paying their employees and suppliers. We have chosen a few of the points that you can be interested in. If you are in need to get more information or further assistance contact us today

1, Employers:

• An increase in the expanded employment tax incentive amount: The first set of tax measures provided for a wage subsidy of up to R500 per month for each employee that earns less than R6 500 per month. This amount will be increased to R750 per month at a total cost of around R15 billion. An increase in the proportion of tax to be deferred and in the gross income threshold for automatic tax deferrals: The first set of tax measures also allowed tax compliant businesses to defer 20 per cent of their employees’ tax liabilities over the next four months (ending 31 July 2020) and a portion of their provisional corporate income tax payments (without penalties or interest). The proportion of employees’ tax that can be deferred will be increased to 35 per cent and the gross income threshold for both deferrals will be increased from R50 million to R100 million, providing total cash flow relief of around R31 billion with an expected revenue loss of R5 billion.

2, Provisional Tax:

• See the following measures aimed in assisting small to medium-sized businesses (individuals, companies, and trusts (including micro-businesses) to alleviate cash flow problems for compliant provisional taxpayers:
  • Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing penalties and interest for the late payment of the deferred amount;
  • The first provisional tax payments due from 1 April 2020 to 30 September 2020 will be based on 15 percent of the estimated total tax liability, while the second provisional tax payments due from 1 April 2020 to 31 March 2021 will be based on 65 percent of the estimated total tax liability (after deducting the 15% payment amount received from the 1st period into account);
  • Provisional taxpayers with deferred payments will be required to pay the remaining 35% tax liability when making the third provisional tax payment in order to avoid interest charges on assessment.

3, Skills development levy:

• Skills development levy holiday: From 1 May 2020, there will be a four-month holiday for skills development levy contributions (1 per cent of total salaries) to assist all businesses with cash flow. This provides relief of around R6 billion.

4, Adjusting PAYE for donations made through the Employer to the Solidarity Fund:

• In order to encourage South Africans to make contributions to the Solidarity Fund in line with the President’s call to action, it is proposed that the tax-deductible limit for donations, currently 10 per cent of taxable income, be increased to 20 per cent in respect of donations in cash or of property in kind donated and actually paid or transferred to the Solidarity Fund at the end of the year of assessment of the donor to the Solidarity Fund during the 2020/21 tax year. There will, thus, be a limit of 10 per cent for any qualifying donations (including donations to the Solidarity Fund in excess of its specific limit) and an additional 10 per cent for donations to the Solidarity Fund.The 20 per cent tax-deductible limit for donations will apply only to donations made during the 2020/2021 tax year. Any donations over the limit made during the 2020/2021 tax year will be carried forward and deemed to be a donation made in the succeeding year of assessment (2021/2022) and be subject to the 10 per cent limitation in that year.

more information can be also found on the website of SARS

To summaries the main point of the speech that our Mr President Ramaphosa announced. As on 21 April 2020, it has been announced the implementation of significant social relief and economic support measures in South Africa which are required as a result of the impact of COVID-19.

This will involve a total package of R 500 billion, amounting to approximately 10% of the country’s gross domestic product, and highlights how significantly the pandemic is impacting South Africa at both social and economic levels.

As part of this relief package, in addition to the existing tax relief measures, certain additional and amended tax relief measures were also announced.

These are as follows:

• A four-month holiday for company’s skills development levies.
• The fast-tracking of VAT refunds.
• The current PAYE payment deferral of 20% has been increased to 35%.
• The current turnover threshold of R 50 million for companies to qualify for the deferral of payment of provisional taxes and PAYE has been increased to R 100 million.
• In addition, businesses whose turnover thresholds are greater than R 100 million can apply on a case by case basis for deferral of provisional tax payments to apply.
• The tax claim of donations to the Solidarity Fund has been increased by an additional 10% of taxable income.
• A 3-month delay for filing and the first payment of carbon tax.

The specific details surrounding these tax relief measures will be further clarified by the Minister of Finance over the next few days.

We would also advise businesses that the relief measures through the Unemployment Insurance Fund (“U.I.F.”) are still in place, and as per President Ramaphosa’s speech have to date paid out in excess of R 1.6 billion.

What is important to note, as regards the U.I.F. benefits, is that applications should be made before the lockdown period terminates otherwise entities may not qualify for said.