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Question & Answer |
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Q: What are the tax relief measures announced?
A: The following tax reliefs were announced:
- The expansion of the Employment Tax Incentive (ETI);
- Employeesf Tax Deferral of 35% of an employer’s total employeesf tax liability;
- Provisional Tax Deferral of 35% of a taxpayer’s provisional tax liability; and
- Payment Holiday for Payment Holiday for skills development levy contributions.
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Q: When does the tax relief take effect?
A: The expansion of ETI, employees’ tax and provisional deferral will take effect from 1 April 2020.
The SDL payment holiday will take effect from 1 May 2020.
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Q: Who are qualifying taxpayers?
A: For employees’ tax: a company, trust, partnership or individual.
A: For provisional tax: a company, trust, or individual.
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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 qualifying taxpayer who is conducting a trade;
- with a gross income of R100 million or less for the year of assessment the ending on after 1 April 2020 but before 1 April 2021; and
- the gross income must not include more than 20% in aggregate of interest, dividends,
foreign dividends, rental from letting fixed property and any remuneration received from an
employer –
- if the rental of fixed property is the primary trading activity and the rental income is substantially the whole of the gross income, disregard this exclusion test; and
o for purposes of a partnership, use the aggregate partner’s gross income from the partnership; or
- is a qualifying micro business who meet the requirements set out in the Sixth Schedule.
Note: For further details, please refer to the guide on the Turnover Tax webpage AND
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.
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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.
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Q: What is the Employment Tax Incentive (ETI) tax relief?
A: The expansion of the ETI involves
- An increase of R750 in the maximum incentive available in respect of qualifying employees (18 – 29
years). This increases the maximum incentive from R1000 to R1750 for the first 12 months of
employment and from R500 to R1250 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 R750.
- 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.
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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.
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Q: What is the Employees’ Tax Deferral?
A: The employees’ tax deferral allows qualifying taxpayers to defer 35% of their employees’ tax liability for
each tax period from 1 April 2020, running through to 31 July 2020. The remaining 65% must be paid by the
relevant due dates.
Illustration:
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.
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Q: What amount must I declare on my EMP 201?
A: The full employees’ tax liability withheld or deducted from remuneration must be declared (that is, as per
normal process). If you are a qualifying taxpayer, only pay 65% of this employees’ tax liability by the relevant
due dates. SARS will defer the 35% employees’ tax liability and not impose/charge any penalties and interest
on this deferred amount.
Note that:
- For April 2020, the full SDL and UIC liability must be calculated and paid as per normal rules.
- For May 2020 to July 2020, only the full UIC liability must be calculated and paid as per normal rules.
For SDL, there is a payment holiday.
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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:
Note: R1 820 000 less payment of R420 000 made for first provisional tax period.
No penalties and interest on the deferred amount.
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Q: What amount must I declare on my IRP6 (provisional tax return)?
A: The total estimated tax liability must be declared (that is, as per normal process). If you are a qualifying
taxpayer, only pay 15% (first provisional tax period) or 65% (second provisional tax period) of the tax liability
by the relevant due dates. The deferred tax liability will not attract any penalties and interest. When applying for the COVID-19 relief, make sure that you capture the gross income amount in the turnover block (must not be zero) on the IRP6 return.
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Q: Please explain the difference between the current rules for ETI versus the expanded ETI as per the draft
Bill?
A: The table below provides an overview of the new proposed rules: (1) first 12 months, second 12 months;
and two new categories which are only applicable for the months of April, May, June and July 2020.
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Section 7 (2) – current rules for first 12 months
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Changes for the months of April, May, June & July 2020
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Summary:
For months of April May, June & July 2020, an employer can claim –
1st 12 months where monthly remuneration is
· Less than R2 000 = R750 + 50% of month remuneration
· R2 000 to R4 499 = R 1750
· R4 500 to R6 499 = formula
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(2) During each month of the first 12 months in respect of which an employer employs a qualifying employee,
the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of
the employee is—
a) less than R2 000, is an amount equal to 50 per cent of the monthly remuneration of the employee;
b) R2 000 or more but less than R4 500, is an amount of R1 000;
c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following
formula:
X = A (B x (C D))
in which formula—
i. “X” represents the amount of the monthly employment tax incentive that must be determined;
ii. “A” represents the amount of R1 000;
iii. “B” represents the number 0,5;
iv. “C” represents the amount of the monthly remuneration of the employee; and
v. “D” represents the amount of R4 500; or
d) R6 500 or more, is an amount of nil.
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(2) During each month of the first 12 months in respect of which an employer employs a qualifying employee,
the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of
the employee is—
a) less than R2 000, is an amount equal sum of the amount of R750 and an amount equal to 50 per cent of the monthly remuneration of the employee;
b) R2 000 or more but less than R4 500, is an amount of R1 750;
c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following
formula:
X = A (B x (C D))
in which formula—
i. “X” represents the amount of the monthly employment tax incentive that must be determined;
ii. “A” represents the amount of R1 750;
iii. “B” represents the number 0,875;
iv. “C” represents the amount of the monthly remuneration of the employee; and
v. “D” represents the amount of R4 500; or
d) R6 500 or more, is an amount of nil.
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Section 7 (3) – current rules for 2nd 12 months
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Changes for the months of April, May, June & July 2020
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Summary:
For months of April May, June & July 2020, an employer can claim –
2nd 12 months where monthly remuneration is
· Less than R2 000 = R750 + 25% of month remuneration
· R2 000 to R4 499 = R 1250
· R4 500 to R6 499 = formula
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(3) During each of the 12 months after the first 12 months that the same employer employs the qualifying employee, the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is—
a) less than R2 000, is an amount equal to 25 per cent of the monthly remuneration of the employee;
b) R2 000 or more but less than R4 500, is an amount of R500;
c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following formula: X = A (B x (C D))
in which formula—
i. “X” represents the amount of the monthly employment tax incentive that must be determined;
ii. “A” represents the amount of R500;
iii. “B” represents the number 0,25;
iv. “C” represents the amount of the monthly remuneration of the employee; and
v. “D” represents the amount of R4 500; or
d) R6 500 or more, is an amount of nil.
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3) During each of the 12 months after the first 12 months that the same employer employs the qualifying employee, the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is—
a) less than R2 000, is an amount equal to the sum of R750 and an amount equal to 25 per cent of the monthly remuneration of the employee;
b) R2 000 or more but less than R4 500, is an amount of R1 250;
c) R4 500 or more but less than R6 500, is an amount determined in accordance with the following formula:
X = A (B x (C D))
in which formula—
i. “X” represents the amount of the monthly employment tax incentive that must be determined;
ii. “A” represents the amount of R1 250;
iii. “B” represents the number 0,625;
iv. “C” represents the amount of the monthly remuneration of the employee; and
v. “D” represents the amount of R4 500; or
d) R6 500 or more, is an amount of nil.
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New insertion – section 7(3A)
For the months of April, May, June & July 2020
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New insertion – section 6(a)(i)
For the months of April, May, June & July 2020
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Summary:
For months of April May, June & July 2020, an employer can claim –
For employees18 to 29 years that has exhausted the 24 month period & meet all other criteria, an employer can claim –
· Where remuneration is less than R4 499 = R750
· R4 500 to R6 499 = formula
For employees 30 to 65 & meet all other criteria of an qualifying employee, an employer can claim –
· Where remuneration is less than R4 499 = R750
· R4 500 to R6 499 = formula
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“(3A) During each month—
a) after the first 24 months that the same employer employs a qualifying employee contemplated in section 6(a)(i)(aa)NEW or 6(a)(ii) or (iii); or
b) that the employer employs a qualifying employee contemplated in section 6(a)(i)(bb)NEW,
the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is—
i. less that R4 500, an amount of R 750;
ii. R4 500 or more but less than R6 500, an amount determined in accordance with the formula:
X = A – (B x (C – D))
in which formula—
(aa) ‘X’ represents the amount of the monthly employment tax incentive that must be determined;
(bb) ‘A’ represents the amount of R750;
(cc) ‘B’ represents the number 0,375;
(dd) ‘C’ represents the amount of the monthly remuneration of the employee; and
(ee) ‘D” represents the amount of R4 500; or
R6 500 or more, an amount of nil.
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(aa) is not less than 18 years old and not more than 29 years old at the end of any month in respect of which the employment tax incentive is claimed; or
(bb) is not less than 30 years old and not more than 65 years old at the end of any month in respect of which the employment tax incentive is claimed;”.
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