“I have a construction company which has been hard hit by the Covid-pandemic and although I have managed to keep our doors open and not retrench my employees, we are in dire straits. I understand that there are some tax relief measures which I can access to assist my company. Is this true?”
You are correct about the availability of tax relief measures for your company. President Ramaphosa in April 2020 announced the availability of tax measures to help alleviate the impact of the pandemic. Draft legislation to provide for tax relief were published for comment and eventually signed by the President on 3 November 2020 as the Disaster Management Tax Relief Act 13 of 2020 and the Disaster Management Tax Relief Administration Act 14 of 2020 (jointly the “Tax Relief Acts”). I will briefly highlight some of the relief aspects contained in the Tax Relief Acts for companies and employers:
Deferral of Employees Tax (Pay as You Earn)
The Tax Relief Acts make provision for employers to only pay 65% of employees tax with respect to amounts deducted or withheld during the period commencing 1 April 2020 ending 31 August 2020. The remaining 35% of the PAYE will be included in the gross employees’ tax which is due and payable in 6 equal monthly instalments commencing on 7 October 2020 and ending 5 March 2021. No penalties and interest will be levied on deferred amounts whilst late payment or non-payment of the remaining 35% will be subject to penalties and interest. This relief enables employers to utilize the 35% tax relief for cashflow purposes in the short term.
Deferral of Provisional Tax
For the period commencing 1 April 2020 ending 30 September 2020, qualifying taxpayers who pay provisional tax may pay 15% instead of 50% of an amount equal to the total estimated liability for normal tax in respect of the relevant year of assessment less any prescribed amounts in respect of provisional tax payable and may pay only 65% instead of their total estimated liability for the period commencing 1 April 2020 ending 31 March 2021. No penalties and interest will be levied on deferred amounts whilst deferred provisional payments due and payable will be subject to interest.
Micro Businesses Interim Payments
Qualifying micro businesses may, during the period commencing on 1 April 2020 and ending on 31 August 2020, in respect of an interim payment payable, pay 15% instead of 50% of the amount of tax calculated and may during the period commencing on 1 September 2020 and ending on 28 February 2021, pay 65% instead of the total amount payable. No penalties will be levied and interest will not be charged in respect of amounts deferred by qualifying micro businesses. Penalties and interest will only become applicable when the deferred amounts become due and payable.
Donations to Solidarity Fund
The tax-deductible limit for donations which are made to the Solidarity Fund by employers on behalf of their employees has been increased. For a period of 3 months commencing on 1 April 2020 to 1 July 2020, an employer may deduct from its employee’s remuneration an amount which does not exceed 33.33% of that remuneration per month after deduction of the prescribed amounts. Alternatively, an employer may for a period of six months commencing on 1 April 2020 deduct an amount which does not exceed 16.66% of an employee’s remuneration per month after deduction of the prescribed amounts.
Value-Added Tax (VAT) Refunds
Vendors registered as a category A or category B VAT vendor can receive VAT refunds due to them much quicker as such vendors will be deemed to fall within a category C if a return to the Commissioner of SARS is furnished and the tax payable by or refund due to the vendor is calculated in respect of a month that falls within the two months that constitute the Category A or Category B tax period.
Extension of Time Periods
The lockdown period will be regarded as dies non (disregarded and not taken into account) for some procedures contained in the Income Tax Act of 1962, the Tax Administration Act of 2011 and the Customs Excise Act of 1964. The dies non will however exclude some procedures which fall under these Acts so it is important to note that all procedures will not be covered under the dies non application.
Amendments to the Employment Tax Incentive Act
The Employment Tax Incentive Act of 2013 (“ETI Act”) was introduced to encourage employers to employ young persons (between 18 and 29 years old) in order to assist them to gain the required work experience. As such, employers who employ qualifying employees in terms of the ETI Act pay decreased employees’ tax by claiming R1000 in the first 12 months of a qualifying employee’s employment and R500 in the second 12 months of employment. The ETI Act sets out further requirements that an employer must adhere to in order to benefit from ETI Act incentives.
The Tax Relief Acts have expanded the application of the ETI Act to enable employers to retain most of their employees notwithstanding the effects of the pandemic. For the period commencing 1 April 2020 to 31 July 2020, an employer can claim R1750 (per qualifying employee) in the first 12 months of employment and R1250 (per qualifying employee) in the second 12 months of employment. An employer can also claim R750 per qualifying employee notwithstanding that a claim had already been made in the first 24 months of an employee’s employment. The ETI incentives will also be applicable for employees aged between the ages of 30 to 65 and may be claimed on a monthly basis as opposed to twice a year.
Covid19 Disaster Relief Organisation Donation Deductions
Taxpayers who make any donations during the year of assessment to a COVID-19 disaster relief organisation will qualify for a taxable deduction under section 18A of the Income Tax Act.
Amounts Received from Covid-19 Disaster Relief Organisation not included in Remuneration
Any amount paid by a Covid-19 disaster relief organisation on behalf of an employer will be deducted or excluded by the employer from remuneration in calculation of the balance of remuneration in terms of the Income Tax Act.
Temporary Exemption from Skills Developments Levy
Employers as defined in section 1 of the Skills Development Levies Act of 1999 will be exempt from liability for and payment in terms of section 3 thereof. This exemption applies for amounts payable by an employer to an employee on or after 1 May 2020 but before 31 August 2020.
It is important to note that most of the sections in the Tax Relief Acts only apply retrospectively for the lockdown period and not indefinitely. It is therefore advisable that you consult your tax advisor to assist you to ascertain what relief you would qualify for and assist you to qualify for such relief.