Government COVID-19 tax concessions

The impact of the COVID-19 pandemic has had far reaching implications on the South African economy and businesses, big or small. The true spirit of South Africans has come to the fore though and we have seen general society and Government quickly respond to deal with the hardships that have quickly become evident. Government has implemented various concessions to assist with the alleviation of the cash flow burden that tax compliant small to medium sized businesses may suffer arising as a result of the COVID-19 outbreak. The following concessions will be for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020:

  • Deferral of 35% of the payment of PAYE liability, without SARS imposing administrative penalties and interest thereon.
  • The deferred PAYE liability must be paid to SARS in equal instalments over a period of 6 months commencing on 01 August 2020, i.e. the first payment must be made on 07 September 2020.

Treasury has proposed the following changes to the qualifying criteria for the Employment Tax Incentive scheme during this concession period:

  • The Maximum ETI claimable per qualifying employee is increased to R1 750 in the first year of employment and to R1250 in the second year of employment.
  • Employers to be allowed to claim an ETI amount of R750 for employees who are between the ages of 18 and 29 years and are no longer eligible for ETI as the employer has claimed ETI in respect of those employees for 24 months (First new category).
  • Employers to be allowed an ETI amount of R750 for employees who are between the ages of 30 and 65 years who earn less than R6 500 (Second new category) and
  • The payment of ETI reimbursements to be made monthly instead of twice a year.

Provisional Tax has been addressed by the provision of the following concessions:

  • Deferral of the portion of the first and second provisional tax payments to SARS, without SARS imposing administrative penalties and interest for late payment of the deferred amount.
  • The first provisional tax payment (due from 01 April 2020 to 30 September 2020) to be based on 15% of the total estimated liability and the second provisional tax payment (due from 01 April 2020 to 31 March 2021) to be based on 65% of the total estimated liability.
  • The deferred amount must be paid when making third provisional tax payment (top-up) to avoid interest being charged.

The requirements to be met for the above proposed tax relief are as follows:

  • Annual turnover not exceeding R100m
  • The company must be fully tax compliant (No outstanding returns, no outstanding tax debt other than a debt of less than R100 suspended debt or debt subject to the instalment payment agreement.

A Skills Development Levy (SDL) holiday was introduced in the second wave of concessions. From 1 May 2020, there will be a four-month holiday for SDL contributions (1% of total salaries) to assist all businesses with cash flow. All employers who are registered for SDL will automatically qualify for the SDL payment holiday. The zero amount SDL liability will be defaulted on the relevant EMP 201 returns.

The tax deductible limit for donations (currently 10% of taxable income) will be increased by an additional 10% for donations to the Solidarity Fund during the 2020/21 tax year. Therefore, there will be a limit of 10% for any qualifying donations (including donations to the Solidarity Fund in excess of its specific limit) and an additional 10% for donations to the Solidarity Fund.

The 20% tax-deductible limit for donations will apply only to donations made during the 2020/2021 tax year. Any donations over the limit made during the 2020/2021 tax year will be carried forward and deemed to be a donation made in the succeeding year of assessment (2021/2022) and be subject to the 10% limitation in that year.

The donations thresholds have also been increased at payroll level. Employers can traditionally factor in donations of up to 5% of an employee’s monthly salary when calculating the monthly employees’ tax to be withheld. An additional percentage that can be factored in up to 33.3%, depending on the employee’s circumstances – will be provided for a limited period for donations to the Solidarity Fund.

This will ensure that the employee gets the deduction that is in excess of 5% much earlier than under normal circumstances and will therefore not have to wait until final assessment to claim a potential refund, provided the donation is made to the Solidarity Fund.

However, it is important to note that a final determination must still be made upon assessment as the employee may have other income, deductions, or losses that impact the final taxable income before the deduction of donations.

If these concessions are utilised effectively the cashflow injection into companies will go a long way to assisting such entities get through these trying times. The concessions must be managed correctly though as any slip ups could cost the company in terms of penalties and interest.

Skills Development – how to claim

If you are an organisation that is liable for and registered to pay a Skills Development Levy to SARS (where an employer expects that the total salaries will be more than R500 000 over the next 12 months, that employer becomes liable to pay SDL), you need to submit your Workplace Skills Plan (WSP) and Annual Training Report (ATR) to your specific SETA by 30th April yearly to qualify for money back in training grants.

These are the percentages that you can recover:

  • 15% of the levy your company pays when you appoint and register a skills development facilitator
  • 10% of the levy when you prepare, submit and get approval for a workplace skills plan for the appropriate SETA
  • 20% of the levy when you prepare an annual training report based on your approved workplace skills plan

You can claim the cost of training, facilitators, training venue costs, course fees and course material. There must be documentation to prove the above.

HRTorQue does offer this service so if you need assistance please contact us on [email protected].

Skills Development Levy Annual Training Report and Workplace Skills Plan Deadline

Payment towards the Skills Development Levy grant scheme is legislated in terms of the Skills Development Levies Act, 1999. Under this act every employer in South Africa who is registered with SARS (South African Revenue Services) for PAYE; and has an annual payroll in excess of R500,000 or more than 50 employees must register with SARS to pay the Skills Development Levy.

If an employer wishes to have access to recover either a mandatory or discretionary grant (to reclaim portion of their SDL levy to support their staff training), or they wish to claim BBEEE points by setting up an apprenticeship or learnership programme, they are required to register with their appropriate SETA (Sector Education and Training Authority) and submit an Annual Training Report and Workplace Skills Plan by the 30 April each year.

If you need assistance preparing either of these reports please feel free to contact one of our consultants at [email protected].

Skills Development Levy – Q&A

In this article we explore some of the common questions we get around the Skills Development Levy and interacting with your SETA.

Who can be my company’s Skills Development Facilitator and what do they do?

Your company’s skills development facilitator (SDF) can be either:
One of your employees;
An external person who you have formally contracted to take on this position; or
A person who you, together with a number of other employers, employ to assess the group’s skills development needs.

Your SDF will act as a liaison between your company and your Seta.

Your SDF must:

  1. Liaise with your Seta;
  2. Develop quality-assurance systems in your company;
  3. Develop, submit and implement your company’s workplace skills plan;
  4. Draft an implementation report against a workplace skills plan; and
  5. Tell you what your Seta’s quality assurance requirements are.

Can in-house training be considered a pivotal program?

Pivotal Programs are defined as professional, vocational, technical and academic learning programmes that result in qualifications or part qualifications registered on the National Qualifications Framework (NQF) that address critical and scarce skills needs. Internal programs would need to be registered in terms of NQF to be classified as pivotal and allow you to claim accordingly.

Must out-house training be accredited with an ETQA (Education and Training Quality Assurance Bodies) or is a certificate of completion enough?

Any course that is not accredited can be claimed for under the mandatory grant whereas training that is accredited with an ETQA can be claimed for under Pivotal and Discretionary grants.

How do unit standards work and how do we find out which unit standards are needed and likely to be granted discretionary funding?

A unit standard is:
A registered statement of desired education and training outcomes and its associated assessment criteria, together with administrative and other information as specified in the regulations.

Each unit standard has a credit value which is equivalent to 10 hours of notional learning. Notional learning time is:

  • The learning time that it would take an average learner to meet the outcomes defined.
  • It includes concepts such as contact time, time spent in structured learning in the workplace and individual learning.

Each unit standard has to be registered on the National Qualifications Framework (NQF) – at a particular level, with a prescribed number of credits.

In terms of finding out what discretionary funding you will be granted; the best thing to do is to find out what the scarce and critical skills are as listed by your Seta.

Can you claim back your SDL for training non-employees (eg. teaching matriculants basic computer skills)?

Yes, this would be listed under Non-Employees.

How can you increase your BBBEE score with SDL claims?

This is based on your percentage of spend on BLACK employees and non-employees training and provided the criteria are met, can be credited against various part of the your scorecard (including Skills and Socio Economic Development).

Skills Development Levy Claims

Claim a Refund of up to 50% of your Skills Levy

The deadline for the submission of Workplace Skills Plans and Annual Training Reports is 30 June 2013. Organisations that comply with the Skills Development Act are able to claim up to 50% of their Skills Development Levy.

Should you need assistance with the completion of your Annual Training Report and Workplace Skills Plan please contact Nicky Hardwick: [email protected].

Skills Development Registrations

The Skills Development Act No. 97 of 1998 has as its purpose:

  • To develop the skills of the South African workforce
  • To increase the levels of investment in education and training
  • To encourage employers to provide employees with the opportunity to learn new skills
  • To encourage workers to participate in training programmes
  • To improve employment prospects for previously disadvantaged persons
  • To ensure the quality of workplace education and training

 
Every employer as defined in Fourth Schedule to the Income Tax Act is liable for the levy, except for the following:

  • Any public service employer
  • Any employer for whom there are reasonable grounds for believing that the total amount of payroll (remuneration) payable to all its employees during the following 12 months will not exceed R 500 000
  • Any religious or charitable institution or fund of a public character whose income is exempt from income tax
  • Any national or provincial public entity, if 80% or more of its expenditure is defrayed from funds voted by Parliament

 
If you fell into any of the categories above at the time that you outsourced your payroll to HRTorQue, you will not be registered for, nor will your company be calculating SDL and if we are making payments to SARS on your behalf, we will not be making this payment on behalf of your company, because you fell outside the definition as above.

Possible Action from you:

If you anticipate at any time that your payroll remuneration will exceed R500 000 in the following 12 months, or one of the other conditions has changed within your organisation.

Please advise your payroll administrator with immediate effect. Our tax department will contact you and make arrangements to register you for SDL, the payroll will be amended to calculate this amount and our payroll administration department will invoice and pay over this amount for you.

We unfortunately cannot make this choice for you as we cannot anticipate your actual salary bill for the next 12 months.

Please contact us if you don’t understand what’s required, or if we can assist you in any way: 031 564 1155.