Mar 2020 | RSA – COVID-19 Tax Measures
The recent COVID-19 outbreak will have significant and potentially lasting impacts on the economy, with businesses facing the risk of cash flow problems. Tax compliant small to medium sized businesses play an important role in stimulating economic activity, job creation, poverty alleviation as well as the general improvement of living standards, and are expected to be among the hardest hit. In order to assist tax compliant small to medium sized businesses, Government proposes measures aimed at assisting to alleviate cash flow problems experienced during this difficult period.
In order to assist with alleviating cash flow burdens arising as a result of the COVID-19 outbreak, the Minister of Finance has announced the following exceptional tax measures as part of the fiscal package outlined by President Cyril Ramaphosa on 23 March 2020 in his speech on the Escalation of Measures to Combat COVID-19. This is for tax compliant small to medium sized businesses, for a period of twelve months, beginning 1 April 2020 and ending on31 March 2021.
These measures are over and above the tax proposals made in the 2020 Budget on 26 February 2020.
The tax adjustments are made in light of the National State ofDisaster and due to the significant and potentially lasting negative impacts onthe economy from the spreading of the COVID-19 virus.
There is a critical need for government interventions to assist with job retention and assist businesses that may be experiencing significant distress.
These measures include:
- The 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. This will help over 4 million workers.
Example:1
Employer A has 10 workers earning R4 500 per month each. The Employer can retain up to an additional R5 000 from the employer’s PAYE laibility each month between April and July.
Example:2
Employer B has 3 workers. The employer claims the ETI for Employee A, the employer exhausted ETI claims for 27-year-old Employee B two years ago, and Employee C is 34 years old and has never been a qualifying employee. The employees each earn R4 500 per month. Employer B will be able to retain R2 500 per month. Since these are the only 3 workers, the amount will likely be claimed as a reimbursement from SARS
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- The South African Revenue Service to accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.
- Tax compliant businesses with a turnover of R50 million or less will be allowed to delay 20% of their employees’ tax liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. This intervention is expected to assist 75 000 small and medium term enterprises.
System Impact
- We will be creating an additional component to calculate the ETI Extended COVID-19 relief on the system. This will be visible during the first two weeks of April on the system.
- We are still waiting to confirm if there will be additional changes to the statutory reports.