COVID-19 – Tax measures to counter impact of virus

Finance Minister Tito Mboweni on Sunday announced exceptional tax measures to counter the impact of the Coronavirus (COVID-19) pandemic.

“The Minister of Finance has announced the following exceptional tax measures as part of the fiscal package outlined by President Cyril Ramaphosa on 23 March 2020 in his speech on the Escalation of Measures to Combat COVID-19,” said the Ministry of Finance.

The measures come as South Africa is currently under a 21-day lockdown, which got underway at midnight on 26 March. To date, South Africa has recorded over 1 000 cases of the virus.

These measures are over and above the tax proposals made in the 2020 Budget on 26 February 2020.

The tax measures include:

·        The introduction of a tax subsidy to employers of up to R500 per month for the next four months for private sector employees earning below R6 500 under the Employment Tax Incentive. This will help over 4 million workers.
·        The South African Revenue Service (SARS) will accelerate the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.
·        Tax compliant businesses with a turnover of R50 million or less will be allowed to delay 20% of their employees’ tax liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months. This intervention is expected to assist 75 000 small and medium term enterprises.

“The tax adjustments are made in light of the National State of Disaster and due to the significant and potentially lasting negative impacts on the economy from the spreading of the COVID-19 virus,” said the ministry.

It said there is a critical need for government interventions to assist with job retention and assist businesses that may be experiencing significant distress.

The measures will take effect from 1 April 2020.

Bills to be taken to Parliament

“The measures will be given legal effect in terms of two bills to be tabled when Parliament re-convenes later this year for retrospective enactment. These bills are the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill,” said Treasury.

The draft bills, alongside their draft explanatory memorandum, will be published for public comment on the National Treasury and SARS websites by 1 April 2020.

“Together with the Commissioner of SARS, National Treasury will also be considering additional exceptional adjustments to assist with COVID-19 relief efforts and to the tax treatment of newly formed funds in this regard,” said the ministry.

The draft explanatory notes regarding the COVID-19 tax measures can be found on the National Treasury ( ) and SARS ( ) websites.

COVID-19 – Current Interventions to Provide Relief to Businesses

As you know, President Cyril Ramaphosa announced a national lockdown with effect from midnight on Thursday, 26 March. As accountants, we’re duty-bound to support his efforts to mitigate and slow down the spread of the COVID-19 virus. At the same time, we need to make sure clients and businesses survive the lockdown.

The President announced a number of interventions that place accountants and tax practitioners at the centre of the response to fight COVID-19. We urge you to carefully consider these interventions to be informed and ready to serve your clients. Your technical abilities will be the hope for many in distress.

This is a summary of the current interventions available and under development to provide relief.

  • National Disaster Benefit Fund: R 30 Billion has been allocated to a special National Disaster Benefit Fund, which will pay Unemployment Insurance Fund benefits for up to three months to qualifying workers whose income has been impacted by the coronavirus pandemic. This fund will address the coronavirus related job losses, support job retention, illness payouts and reduced time claims.
  • Informal sector support: A safety net is being developed to support persons in the informal sector.
  • SASSA: The South African Social Security Agency (Sassa) grants for pensioners and people with disabilities to be paid early.
    Temporary Employee Relief Scheme: A special dispensation for companies that are in distress, through this employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment.
  • Banking sector: The Department of Trade and Industry has passed new regulations in the banking sector. The exemptions will allow banks to work together which will help small businesses, consumers and firms in distress.
  • Tax subsidy: A new tax subsidy of up to R 500 per month for the next four months for employees earning below R 6 500 per month.
  • Employment tax incentive: SARS to accelerate employment tax incentive reimbursement from twice per year to monthly.
  • PAYE & Provisional corporate income tax: Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their PAYE liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.
  • Compensation Fund: Employees who fall ill through exposure at their workplace will be paid through the Compensation Fund.
  • SMME SA: The Department of Small Business Development made R 500 million available to distressed SMEs. Registration is now open for small and medium-sized businesses that require help during the coronavirus crisis.
  • IDC: The Industrial Development Corporation, together with the Department of Trade, Industry and Competition has committed R 3 Billion to a range of funding products in support of business to address vulnerable firms and for companies critical to fight the virus and its economic impact.
  • Tourism Relief Funding: The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.
  • Solidarity Response Fund: This was setup to help deal with the fallout of the coronavirus, and measures to slow its spread. Individuals and businesses can contribute to this fund. Johann Rupert and Nicky Oppenheimer have donated R 1 billion each into this newly established Solidarity Fund.
  • Possible temporary reductions: Possible temporary reductions of employer and employee contributions to the Unemployment Insurance Fund and possible temporary reduction of employer contributions to the Skill Development Fund.

More specific details on the above-mentioned interventions will be released within the next few days:

Our commitment to you:

SA Accounting Academy, Tax Faculty and SAIT have joined forces to prepare technical alerts and webinars at no charge to our stakeholders as soon as the Government regulations and SARS practice notes are released. We are working on securing presenters to host the first live webinar on Monday, 30 March at 15h00. Click here to book for this free webinar.

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Although we are living in unprecedented times, we want to assure you that SA Accounting Academy will be operating as usual. Our business model supports a virtual-based work environment that enables us to continue servicing our clients during the lockdown period. You will still be able to reach us via email or telephonically if you require any support or have any queries during this time.

For more information you can phone us on 010 593 0466.