THE COVID-19 pandemic is having a great financial impact on businesses, especially SMMEs.
Below is an overview of the economic and fiscal interventions proposed by National Government, as well as those which have already been finalised to limit the financial impact of COVID-19 on businesses.
VAT exemptions: Goods imported will be subject to a VAT exemption and a full rebate of customs duties during the COVID-19 pandemic. These include: food and ancillary products used in the production of food; cleaning and hygienic products; medical and hospital supplies, equipment and personal protective equipment and ancillary products used in the production of the above; fuel, including coal and gas; basic goods, including airtime and electricity.
Expansion of the employment tax incentive (ETI) criteria: As a result of the COVID-19 outbreak, Government has proposed the following changes to the current ETI programme to minimise job losses during this period. The expansion of the ETI programme is limited to a period of four months commencing April 1, 2020. 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 12 months and from R500 to R1 000 in the second 12 qualifying months.
Allowing a monthly ETI claim of R500 during this four month period for employees from the ages of:
- 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
- 30 to 65 who are not eligible for the ETI due to their age;
- Accelerating the payment of employment tax incentive reimbursements from twice a year to monthly.
The effective date for the proposed amendments will be for the period April 1 to July 31, 2020.
Deferral of the employees tax liability (PAYE): In order to assist with alleviating any cash flow burden arising from the COVID-19 outbreak, Government proposed the following tax measures for tax compliant small to medium sized businesses whose turnover does not exceed R50 million:
- Deferral of payment of 20 per cent of the PAYE liability, without SARS imposing administrative penalties and interest for late payment.
- The deferred PAYE liability must be paid to SARS in equal instalments over the six month period commencing August 1, 2020, i.e. the first payment must be made on September 7, 2020.
The effective date for the proposed amendments will have come into operation for the period April 1 to July 31, 2020 for the deferral of the 20 per cent of the payment.
From August 1, 2020 to January 31, 2021, the payment withheld should be paid over six equal instalments.
Deferral of the payment of provisional tax: To assist with alleviating any cash flow burden arising from COVID-19, Government proposed the following tax measures for tax compliant small to medium sized businesses for a period of 12 months beginning April 1, 2020 to March 31, 2021:
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:
- The first provisional tax payment due from April 1, 2020 to September 30, 2020, will be based on 15 per cent of the estimated total tax liability, while the second provisional tax payment from April 1, 2020 to March 31, 2021 will be based on 65 per cent of the estimated tax liability. Accordingly, the total provisional tax payable should amount to 65 per cent of the estimated tax liability;
- Provisional taxpayers with deferred payments will be required to pay the full tax liability i.e. 35 per cent when making the third provisional tax payment in order to avoid interest charges.
SMME funding assistance: The Minister for Small Business Development announced details of the intervention measures to support SMMEs affected by the COVID-19 disaster. Note that only SMMEs registered on the database will be considered. To register your business go to https://smmesa.gov.za.
Businesses applying for funding assistance need to meet the criteria listed on the website.
Temporary employee/ employer relief scheme (TERS): Should an employer as a direct result of COVID-19 need to close, cease and/or suspend its operations for three months or less and suffer financial distress, the company shall qualify for a COVID-19 Temporary Relief Benefit. The benefits will only pay salary costs for the employees during the temporary closure of the business. The maximum amount to be paid per employee will be R6 730 per month. Should an employee’s income fall below the minimum wage of the sector concerned, the employee will be paid a replacement income equal to the minimum wage of that sector.
For the company to qualify for temporary financial relief, it must be registered with the UIF, must comply with the application procedure for the financial relief scheme, and the company’s closure must be directly linked to the COVID-19 pandemic.
Employers must apply for these benefits via email to Covid19 email@example.com
Please note that the above is for information purposes only and does not constitute financial or tax advice. As each individual’s personal circumstances vary, we recommend they seek advice on the matter.
Please note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein. If you are in doubt about any information in this article or require any advice on the topical matter, please do not hesitate to contact any Nexia
SAB&T office nationally.
Article prepared by: Aysha Osman
For any queries, please contact:
- Hassen Kajie (Entrepreneurial Business Services Director)
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- Yousuf Hassen (Entrepreneurial Business Services Director)
M: (+27) 82 333 3376 | E: email@example.com