The last few months have been extremely tough for small business owners as a result of the global COVID-19 pandemic, and various lockdown measures that have created a challenging trading environment. The South African Revenue Service (“SARS”) has identified this hardship, and as a result, the National Treasury recently tabled the Disaster Management Tax Relief Administration Bill, which would assist micro, small and medium businesses should they seek to utilise this relief.
Although many of these measures have applied in practise, they have not officially been included in a tax bill and will soon have the necessary legislative effect (once promulgated).
To be a candidate to claim relief, a small business must:
- Have a tax compliant status;
- Conduct a trade during the year of assessment ending after 1 April 2020 to 31 March 2021, and earn gross income of R100 million or less; and
- Not more than 20% in aggregate of the gross income can come from interest, dividends, royalties, rental payments, annuities, or remuneration received from an employer (generally aimed at passive income).
The relief offered by the Bill covers the following:
Pay-As-You-Earn (“PAYE”) deferral
Employers can claim a four-month deferral relief from 1 April 2020. To claim, two options are available;
- Employers are still required to submit full PAYE returns (EMP201). SARS will issue a statement of account reflecting the relief; or
- Calculate the total payable at 65% of the total.
After 7 August 2020, SARS will determine an amount payable in six equal payments to cover the outstanding (deferred) liability.
Employment Tax Incentive (“ETI”)
This programme runs from April 2020 to July 2020 and is claimed in the monthly EMP201. To claim, an employer is required to calculate the total ETI and 65% of the PAYE. The employer then utilises the lessor of the total ETI, or 65% of the PAYE liability to claim relief.
Provisional tax deferral
The period runs from 1 April 2020 to 30 September 2020 for the first payment period, and from 1 April 2020 to 31 March 2021 for the second provisional payment period. The gist of this assistance is that companies are required to pay only 15% of the first provisional payments and 65% (after deducting the first 15%) of the second payment. The remaining 35% will be payable on the third provisional payment date to avoid interest charges on late payment.
Accelerated value-added tax (“VAT”) refunds
From 1 May 2020, VAT vendors can file monthly VAT claims as opposed to every 2 months. Category A vendors can claim this relief from April 2020 to July 2020, and vendors registered under category B from May 2020 to August 2020.
The above relief measures contained in the Disaster Management Tax Relief Administration Bill are bound to bring some welcome cash flow and liquidity relief to struggling SMMEs in South Africa.
For more information on these relief measures, visit https://www.sars.gov.za/Media/Pages/Tax-Relief-measures.aspx.