COVID-19 Tax Relief

PAYE: Entities, who are tax compliant (tax clearance certificate), with a turnover of less than R50million will be allowed to delay 20% of their monthly PAYE liabilities over the next 4 months. After the 4 months the companies will be required to settle the outstanding amounts not paid during the period. This is deemed to “enhance” cash flow over the next few months, but entities must keep in mind to “budget” for the 20% relieve received during this 4 month period as it will become due at the end of the 4 month period. If not settled penalties and interest will be charged. (In short, the liability is extended to assist entities with cash shortages for the next few months, but entities are required to budget for the settlement liabilities extended)

Provisional taxes: Entities, who are tax compliant (tax clearance certificate), with a turnover of less than R50million will be allowed to extend their provisional tax payments due for the 2020/02 for the next 6 months to “enhance” cashflow positions. Entities must keep in mind that the amount will become due at the end of the 6-month period and if not settled penalties and interest will be charged. (In short, the liability is extended to assist entities with cash shortages for the next few months, but entities are required to budget for the settlement liabilities extended)

UIF: 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 3 months, whichever period is the shortest.

Should an employee become ill, temporarily laid-off or unemployed for a period longer than 3 months, the normal UIF benefits will apply and the following documentation will be required:

• UI19 and UI2.7 (completed by the employer);
• UI2.1 (application form);
• UI2.8 (bank form completed by the bank);
• A letter from the employer confirming that the company is shut down or employees have been temporarily laid-off due to COVID 19; and
• A copy of the employee’s ID document.

Where a company shuts down for a certain period or implements reduced or short time, benefits payable will be the difference between what the employer pays and normal UIF benefits payable should the employees lose their employment.

Where an employee has been quarantined for 14 days due to COVID 19, the illness benefit process will apply. For this to be applied a confirmation letter from both the employer and employee must be submitted together with the application as proof that the employer and employee have both agreed to the 14 days “special leave” granted.

Small business development:

Entities can register at www.smmesa.gov.za and will be asked to provide basic details and indicate whether they will require financial or non-financial assistance or both.

Businesses within the critical sectors as stated, manufacturers, distributors, necessities, food, etc, are expected to receive priority support during the lockdown period.

Compensation fund:

Any employee who falls ill pursuant to exposure to Covid-19 at work will be entitled to claim from the Compensation Fund. Broadly speaking, claimants are required to include such compensation in their gross income for tax purposes.

The amount is, however, exempt from normal tax in accordance with section 10(1)(gB) of the Income Tax Act.

Employee Tax Incentive:

Government has proposed an additional tax subsidy in the amount of up to R500 per month for the next four months per qualifying employee in the private sector.

The employment tax incentive (ETI) is paid to employers who employ qualifying employees (including the youth) and is considered a labour cost sharing mechanism between government and the private sector to incentivise employment.

The existing ETI is aimed at supporting qualifying employees who earn below R6500 per month on a sliding scale based on salary where the employer is registered for Employees Tax.

The employer is entitled to reduce the total amount of its PAYE liability by setting off the ETI amount calculated in respect of that month.

Where there is no PAYE to set off against the ETI amount, the employer will be entitled to a reimbursement of the total ETI amount available as at the end of each PAYE reconciliation period.

A further proposal aims at reducing the reimbursement period to a monthly period.

Solidarity Fund:

A Solidarity Fund has been set up to which South African businesses, organisations, individuals and members of international communities can contribute to.

The Fund’s focus is to combat the spread of the virus, to assist in tracking the spread and to care for those who become ill.

The Fund has its own website which can be visited at www.solidarityfund.co.za.

Other key-matters mentioned:

The Department of Small Business Developments has made available R500 million to immediately assist small and medium enterprises who are in distress, through a simplified application process.

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.

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.

Old age pensions and disability grants will be available for collection on 30 and 31 March 2020. All other categories of grants will be available for collection from 1 April 2020.