Employee Tax Incentive measures – COVID 19
Updated: Sep 8, 2020
Authors: Riëtte Engels-van Zyl – Director & Henri Strydom – Candidate Attorney
In order to minimise the loss of jobs during this critical period of lockdown, government proposes expanding the ETI programme for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 as follows:
1. Increasing the maximum amount of ETI claimable during this four-month period for employees eligible under the current ETI Act from R1 000 to R1 500 in the first qualifying twelve months and from R500 to R1 000 in the second twelve qualifying months.
2. Allowing a monthly ETI claim in the amount of R500 during this four-month period for employees from the ages of:
a. 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
b. 30 to 65 who are not eligible for the ETI due to their age.
3. Accelerating the payment of employment tax incentive reimbursements from twice a year to monthly as a means of getting cash into the hands of tax compliant employers as soon as possible.
PAYE and Provisional Tax
In order to assist with alleviating any cash flow burden arising as a result of the COVID-19 outbreak, Government proposes the following tax measures for tax compliant small to medium sized businesses, for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 (for PAYE) and, for a period of twelve months, beginning 1 April 2020 and ending 31 March 2021 (for Provisional Tax):
1. Deferral of payment of 20 % of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
2. The deferred PAYE liability must be paid to SARS in equal instalments over the 6-month period commencing on 1 August 2020, i.e. the first payment must be made on 7 September 2020.
1. Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing administrative penalties and interest for the late payment of the deferred amount;
2. 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, while the second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65 %of the estimated total tax liability; and
3. Provisional taxpayers with deferred payments will be required to pay the full tax liability when making the third provisional tax payment in order to avoid interest charges.
For the purposes of this proposal, small or medium sized business means any business with an annual turnover not exceeding R50 million. The eligibility criteria for individuals carrying on a business have yet to be finalised, but one possibility is that they will be eligible if their turnover is less than R5 million and no more than 10 % of their turnover is derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.
MEDIA STATEMENT: Explanatory notes on COVID-19 tax measures
For more information on whether and how your business can benefit from the above tax measures, please contact the Lawtons Africa tax team.
Riëtte Engels-van Zyl
Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com