Covid-19 Tax Measures FAQ's

Covid-19 Tax Measures FAQ's

• 03 April 2020
• Individuals Tax
• SARS

Important:

All tax relief will take effect from 1 April 2020.

Disaster Management Tax Relief FAQ’s for Employees’ Tax, ETI and Provisional Tax

Q: What are the tax reliefs announced?

A: The following tax reliefs were announced -
1. The expansion of the Employment Tax Incentive (ETI);
2. Employees’ Tax Deferral of 20% of an employer’s total employees’ tax liability; and
3. Provisional Tax Deferral of 35% of a taxpayer’s provisional tax liability.

Q: When does the tax relief take effect?
A: All tax relief will take effect from 1 April 2020.

Q: Who are qualifying taxpayers?
A: For employees’ tax: a company, trust, partnership or individual.
A: For provisional tax: a company, trust, or individual.

Q: What are the requirements to claim the tax relief?
A: There are two set of requirements that applies to both employees’ tax and provisional tax.
First requirement:

• A taxpayer who is conducting a trade with a gross income of 50 million or less for the year of assessment the period payment is being made for relates to; and
• The gross income must not include more than 10% of income derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.

Second requirement:

• The taxpayer must be fully tax compliant. That is to say, returns across tax types must have been filed and tax debts paid or arrangements made with SARS regarding any outstanding tax debts. It is important for you to ensure you are compliant for Registration, Filing and Payment of all taxes that you are liable for.
• An additional requirement for PAYE and ETI, is that employers must have been registered as an employer with SARS by 1 March 2020 to be able to qualify for these tax reliefs.

Q: What if I am not tax compliant?
A: You must rectify your tax compliance before submitting the relevant returns for these tax periods. Where a return is received for the stated tax periods, and the taxpayer is identified as non-compliant, no tax relief will be granted.

Q: What is the Employment Tax Incentive (ETI) tax relief?
A: The expansion of the ETI involves

• An increase of R500 in the maximum incentive available in respect of qualifying employees (18 – 29 years). This increases the maximum incentive from R1000 to R1500 for the first 12 months of employment and from R500 to R1000 for the second 12 months.
• The expansion also covers qualifying young employees after their first 24 months of employment, as well as qualifying employees from 30 to 65. In these cases, the maximum incentive is R500.
• In addition, any unused ETI amounts will be refunded monthly for these stated tax periods “for employees’ tax returns due on 7 May 2020 through to 7 August 2020.”

Q: When are the ETI measures effective from?
A: The ETI measures will be available to employers who registered as employers with SARS by 1 March 2020. The measures will form part of the normal ETI system administered by SARS and will take effect from 1 April 2020, running through to 31 July 2020. SARS is working hard to ensure that it will be in a position to refund employers whose ETI exceeds their employees tax liability by the time returns are due for the first period covered. This means that refunds will be available from 7 May 2020, instead of later in the year in the current six monthly cycle of refunds.

Q: What is the Employees’ Tax Deferral?
A: The employees’ tax deferral allows qualifying taxpayers to defer 20% of their employees’ tax liability for each tax period from 1 April 2020, running through to 31 July 2020. The remaining 80% must be paid by the relevant due dates.
No penalties and interest on the deferred amounts.
SARS is also working hard to ensure that its systems are updated to accommodate this change by the time returns are due for the first period covered, which is 7 May 2020.

Q: What is the Provisional Tax Deferral?
A: The provisional tax deferral allows qualifying taxpayers to pay –

• First provisional tax period = 15% of total estimated tax liability
• Second provisional tax period = 65% of total estimated tax liability
• Third provisional tax period = deferred 35%

This applies to first provisional tax payments that are due during the period from 1 April 2020 to 30 September and to second provisional tax payments that are due during the period from 1 April 2020 to 31 March 2021.
Illustration:

Estimate Taxable Income                                      R 10 000 000.00

Tax at 28%                                                            R 2 800 000.00

First Provisional Tax Period                          15% R 420 000.00

Second Provisional Tax Period (Note)          65% R 1 400 000.00

Third Provisional Tax Period                         35% R 980 000.00

Note: R1 820 000 less payment of R420 000 made for first provisional tax period
No penalties and interest on the deferred amount.

This article first appeared on sars.gov.za.

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