COVID-19 | SARS relief measures

In this article we analyse the various relief measures made public by the government of the Republic of South Africa. We aim to communicate how South African employers can access these funds and relief measures.

SARS relief measures

On Monday 23 March 2020, the president announced various relief measures to assist employers. The Minister of Finance published Explanatory Notes on COVID-19 Tax measures which will be implemented on 1 April 2020.

(1) Employee Tax Incentive (“ETI”) programme (1 April 2020 – 31 July 2020)

An introduction of a tax subsidy to employers of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive.

The proposal of expanding the ETI programme for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 will be as follows:

• Increasing the maximum amount of ETI claimable during the four months period from R1,000 to R1,500 in first qualifying twelve months and from R500 to R1,000 in the second qualifying twelve months.
• For the following four months, an ETI claim of R500 per employee can be submitted for employees from the ages of:
  • 18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for 24 months; and
  • 30 to 65 who are not eligible for the ETI due to their age
• Note that the expansion will only apply to employers that were registered with SARS as at 1 March 2020.

 

(2) Deferral of payment of employees’ tax liability for Small, Micro and Medium Businesses (1 April 2020 – 31 July 2020)

Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months

The deferred PAYE liability must be paid to SARS in equal instalments over a six-month period, commencing 1 August 2020.

The above mentioned will not apply to an employer if such an employer:

• Has failed to submit any return
• Has any outstanding debt, unless an agreement has been entered into with SARS.

Interest and penalties will apply if the employer has understated the PAYE liability for any of the four months.

(3) Deferral of payment of provisional tax liability for Small, Micro and Medium Businesses (1 April 2020 – 31 July 2020)

Employers that have an annual turnover of less than R50 million and are tax compliant will receive the following assistance beginning 1 April 2020 and ending 31 March 2021:

• 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 (as opposed to 50%).
• The second provisional tax payment due from 1 April 2020 to 31 March 2021, will be based on 65% of the estimated total tax liability (as opposed to 100% less first provisional tax payment).
• The deferred amount of the total tax liability will then be due with the third provisional tax payment to avoid penalties and interest.

The provisional tax relief measures for individuals carrying on a trade have yet to be finalised.

(4) Reduction in UIF and SDL contributions

The temporary reduction in employer and employee contributions of UIF and SDL as announced by the president has not been implemented by National Treasury.

The UIF and SDL contributions should therefore not be adjusted in any way.

(5) VAT

SARS has published Binding General Ruling 52 which provides for an extension of the time period required in which exporters must export goods from South Africa to qualify for VAT at zero rate. SARS has extended the period for direct and indirect exports by an additional three months.

Due to the measures being put in place under the Disaster Management Act 57 of 2002, essential goods will be subject to a VAT exemption and a full rebate of customs duties on importation during the COVID-19 pandemic.

(6) Public comment on the above provisions

Please note that the Disaster Management Relief Bill was published for comment on 1 April”

Please contact us at jonathan@bdkauditors.co.za for assistance with any of the above.

Financing and Investment Benefits

1. Following consultation with social partners, the South African government has set up a Solidarity Fund, which South African businesses, organisations and individuals, and members of the international community, can contribute to. 
   • Reference can be made to the website https://www.solidarityfund.co.za/
2. The Department of Small Business Development has made R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process.
3. The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to our efforts to fight the virus and its economic impact.
4. The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.
5. Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.
6. Last week, in line with its Constitutional mandate, the South African Reserve Bank cut the repo rate by 100 basis points. This will provide relief to consumers and businesses.
7. The Rupert and Oppenheimer donations are administered separately and applications need to be sent to administrators.

Please contact us at jonathan@bdkauditors.co.za for assistance with any of the above.

Claiming from the UIF and Disaster Benefit Fund

If employers are necessitated to suspend operations, do temporary lay-offs and cannot pay employees during this period they can claim from the Disaster Benefit Fund.

The credits accumulated in terms of the Unemployment Insurance Act will be one day credit for every four days worked and contributed towards UIF, available during a four-year cycle of unemployment up to a maximum of 365 days.

The benefit will be at a flat rate equal to the minimum wage (R3 500) per employee for the duration of the shutdown or a maximum period of three months, whichever is shortest.

Claiming from the Temporary Employee Relief Scheme (“TERS”)

Should an employer either suspend or reduce operations for three months or less and this results in financial distress, but does not lay off employees, they can claim from TERS.

• The fund is available for three months or until such time when the Minister withdraws these regulations.

• The TERS allowance may not exceed R17,712 monthly per employee and employees will be paid in terms of the income replacement rate (38% to 60%) as per the Unemployment Insurance Act.

• If the calculated pay out should be less than the minimum wage then the pay-out will revert to an amount equal to such minimum wage.

• The compensation is not linked to the credit system under the UIF.

Contact us at jonathan@bdkauditors.co.za should you require any assistance with claims or need clarity on the above-mentioned. Reference can be made to President Cyril Ramaphosa’s speech by following the link below:

• https://www.gov.za/speeches/president-cyril-ramaphosa-escalation-measures-combat-coronavirus-covid-19-pandemic-23-mar