COVID-19

Summary of revised COVID-19 tax relief measures

To give effect to the tax relief measures to combat COVID-19 pandemic announced by President Cyril Ramaphosa on 23 March 2020, Treasury has published for public comment the Draft Disaster Management Tax Relief Bill and the 2020 Draft Disaster Management Tax Relief Administration Bill on 01 April 2020. We summarise below the tax proposals contained in these bills.

COVID-19 Tax relief measures: Changes to the employment of tax incentive age eligibility criteria and amount claimable. 

We summarise below the proposed changes to the Employment Tax Incentive Act No. 26 of 2013 (“the ETI Act”):

In an attempt to curb unacceptably high youth unemployment, the Employment Tax Incentive (“ETI”)  programme was introduced in 2014 to promote youth employment.

The ETI programme allows the employer to claim the ETI in respect of the qualifying employees:

  • Employees who are between the ages of 18 and 29 years and
  • Earn monthly remuneration of less than R6 500.

The Maximum claimable per qualifying employee is limited to R1000 in the first year of employment and to R500 in the second year of employment.

The ETI can only be claimed for the first 24 months of qualifying employee’s employment by an employer or associated institutions.

The proposes changes to the ETI programme:

The proposed changes to the ETI programme as a result of the COVID-19 outbreak are as follows:

  • The Maximum ETI claimable per qualifying employee is increased to R1 750 in the first year of employment and to R1250 in the second year of employment.
  • Employers to be allowed to claim ETI amount of R750 for employees who are between the ages of 18 and 29 years and are no longer eligible for ETI as the employer has claimed ETI in respect of those employees for 24 months (First new category).
  • Employers to be allowed ETI amount of R750 for employees who are between the ages of 30 and 65 years who earn less than R6 500 (Second new category) and
  • The payment of ETI reimbursements to be made monthly instead of twice a year.

 

The proposed amendments will apply for a period of four months and are deemed to have come into effect on 01 April 2020 and end on 31 July 2020.

For the first twelve months of employment -

 

Monthly Remuneration ​

​Determination

 

Monthly Calculated ETI Amount​

​R0 – R1999

R750 PLUS 50% x monthly remuneration

 

​R0 – R1749.50

R2000 - R4499

​Fixed at R1 750

 

​R1 750

​R4500 – R6499

​Formula: X = A - (B x (C - D))
X = monthly calculated amount
A = R1750
B = 0,875
C = Monthly Remuneration
D = R4500

 

​R 1 750 - R0.875

​R6500 and more

​Nil

 

​R0.00

For the second twelve months of employment

 

​Monthly Remuneration

​Determination

​Monthly Calculated ETI Amount

R0 – R1999

​R750+ 25% x monthly remuneration

​R 0 – R1249.75

​R2000 - R4499

​Fixed at R 1250

​R1250

R4500 – R6499​

​Formula: X = A - (B x (C - D))
X = monthly calculated amount
A = R1250
B = 0,625
C = Monthly Remuneration
D = R4500

​R1250 – R0.625

R6500 and more​

​Nil

​R0.00

For other eligible employees (first and second new category)

 

​Monthly Remuneration

​Determination

​Monthly Calculated ETI Amount

​R0 - R4499

​Fixed at R750

​R750

R4500 – R6499​

​Formula: X = A - (B x (C - D))
X = monthly calculated amount
A = R750
B = 0,375
C = Monthly Remuneration
D = R4500

​R750 – R0.375

R6500 and more​

Nil

R0.00

Deferral of payments and donations.
DEFERRAL OF THE PAYMENT OF EMPLOYEES’ TAX (PAYE) FOR COMPLAINT SMALL TO MEDIUM SIZE BUSINESS (SME)

In order to assist with alleviating cash flow burden as a result of the COVID-19 outbreak, Government has proposed the following tax measures for compliant SME’s for a period of four months commencing on 01 April 2020 and ending on 31 July 2020:

  • Deferral of 35% of the payment of PAYE liability, without SARS imposing administrative penalties and interest thereof.
  • The deferred PAYE liability must be paid to SARS in equal instalments over a period of 6 months commencing on 01 August 2020, i.e. the first payment must be made on 07 September 2020.

Requirements for the proposed tax relief:

  1. Annual turnover not exceeding R100m
  2. No outstanding returns
  3. No outstanding tax debt other than a debt of less than R100 suspended debt or debt subject to the instalment payment agreement.
DEFERRAL OF PAYMENT OF PROVISIONAL TAX FOR COMPLIANT SMALL TO MEDIUM SIZE BUSINESS (SME)

In order to assist with alleviating cash flow burden as a result of the COVID-19 outbreak, Government has proposed the following tax measures for compliant SME’s for a period of 12 months commencing on 01 April 2020 and ending on 31 March 2021:

  • Deferral of the portion of the first and second provisional tax payments to SARS, without SARS imposing administrative penalties and interest for late payment of the deferred amount.
  • The first provisional tax payment (due from 01 April 2020 to 30 September 2020) to be based on 15% of the total estimated liability and the second provisional tax payment (due from 01 April 2020 to 31 March 2021) to be based on 65% of the total estimated liability.
  • The deferred amount must be paid when making third provisional tax payment (top-up) to avoid interest being charged.

Requirements for the proposed tax relief:

  1. Annual turnover not exceeding R100m
  2. No outstanding returns

No outstanding tax debt other than a debt of less than R100 suspended debt or debt subject to the instalment payment agreement.

DONATION TO COVID-19 RELIEF FUND

The tax proposals in relation to COVID-19 Relief Fund are as follows:

  • Donation made to the COVID-19 disaster relief trust will qualify for a tax deduction in the hands of the donor in terms of section 18A of the Income Tax Act, subject to limitation. Section 18A provides that the donor may deduct the amount of qualifying donation limited to 10% of taxable income.
  • Donation to be made by the donor will be exempt from donation tax.
  • Receipts and accruals of the COVID-19 relief trust will be exempt from normal tax.
  • The proposed amendments come into operation 01 April 2020 and apply until 31 July 2020.

Azwinndini Magadani CA(SA)

Director: Tax Advisory, Acting Head of Tax.

Email: Azwinndini.Magadani@sng.gt.com

 

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