Employee quarantines, reduced demand, disrupted operations and restricted movements are just a few of the challenges faced by business during the Covid-19 pandemic. Treasury has published two draft Bills to provide a set of interventions for temporary tax relief for small to medium size businesses to cushion them from economic difficulties. The draft Bills, which will undoubtedly be fast tracked through Parliament, have been published for comment by 15 April 2020.
The first intervention is expanding the Employment Tax Incentive (“ETI”) age eligibility criteria and the amount claimable. This programme promotes employment of young workers between the ages of 18 and 29 with a salary of less than R6 500 per month, by reducing the cost of hiring them. The maximum monthly ETI claimable for each qualifying employee is R1 000 in the first year of employment and R500 in the second year. The ETI can only be claimed for the first 24 months of the qualifying employee’s employment. The proposal is, for a limited period from 1 April 2020 to 31 July 2020, to increase the ETI claimable from R1 000 to R1 500 in the first year and from R500 to R1 000 for the second year. In addition, a monthly ETI claim of R500 will be allowed during the four month period for: (i) employees from the ages of 18 to 29 who are no longer eligible because ETI was already claimed for 24 months; and (ii) ages 30 to 65 who are not eligible due to their age.
The second intervention is that tax compliant small to medium sized businesses (i.e., turnover of less than R50m), may for a limited period from 1 April 2020 to 31 July 2020, defer payment of 20% of the PAYE liability, without late payment penalties and interest. The deferred PAYE liability must be paid to SARS in equal instalments over the six-month period starting on 1 August 2020.
Government’s third intervention is allowing tax compliant small to medium sized businesses, for a period of twelve months (1 April 2020 to 31 March 2021), to defer a portion of the payment of the first and second provisional tax liability to SARS, without penalties and interest. 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. 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.
The final intervention is that government intends to streamline the special tax treatment of funds established to assist with COVID-19 relief measures. COVID-19 disaster relief funds will, on application and approval by SARS, be deemed to be Public Benefit Organisations (PBO) and be subject to the same criteria and benefits prescribed to all PBOs. This will only be for a limited period from 1 April 2020 to 31 July 2020.