Editor’s note: We ran a number of articles in the past few months about the challenges with the Disaster Management Tax Relief Bill, the calculation of ETI and how payroll systems had struggled to keep up. We also warned about the perils of getting this wrong. In practice, it looks like many of our fears have been realised. For help with ETI, please feel free to contact us.
The various releases of the Disaster Management Tax Relief Bill (DMTR Bill) put the enhanced ETI relief measures into effect for April, May, June, and July 2020. The first DMTR Bill was published on 1 April 2020 and was deemed to be effective from the same date, followed by the DMTR Bills published on 1 May and 19 May. As far as the ETI changes are concerned, the provisions were made effective in part retrospectively to 1 April, and the balance of the changes to 1 May.
This very short timeframe, the complexity of the changes, and particularly the changes made in May that were implemented retrospectively to 1 April, put huge pressure on the shoulders of payroll suppliers and employers. This was drawn to the attention of the authorities by the PAGSA at the time.
Employers have asked whether concessions will be granted by SARS to prevent the loss of claims where either their systems or internal processes mean the employers haven’t claimed them in time for the August 2020 EMP501 filing season.
Unfortunately, as expected, there will be no ability to claim this ETI as the legislation doesn’t allow for SARS to make a concession in this regard.
Legislation:
Section 9 of the Employment Tax Incentive Act provides for the roll-over of ETI totals from month to month where this was either more than the PAYE liability for the month or that were not claimed in an earlier month when the ETI was available to be claimed.
Section 9(2) allows any excess or unclaimed ETI to be rolled forward in months during which an employer is not tax-compliant (i.e. the employer has not submitted returns required by any tax Act administered by SARS, or has not paid the taxes due as required by any tax Act).
Section 9(4) states that ETI totals can only be rolled forward during the 6-month tax certificate submission cycle (March to August, and September to February). Any ETI that has not been claimed at the end of the last month of each 6-month cycle (31 August and 28/29 February) is forfeited (“deemed to be nil”).
No changes were made by the DMTR Bill to sections 9(2) and 9(4) of the ETI Act.
SARS Feedback
SARS have confirmed that the above summary of ETI Act sections 9(2) and (4) is correct – all excess ETI claims that were not made via the EMP201 process by 31 August, are forfeited.
Further, the ETI Act does not allow the SARS Commissioner to consider requests to allow increased ETI claims to be made after the 6-month tax certificate submission cycle has ended (31 August and 28/29 February), even under the difficult circumstances of the ETI relief period of April, May, June, and July 2020.
The SARS eFiling and e@syFile systems are aligned with section 9 and will not allow the ETI totals on the EMP501 to be increased.
However, the ETI totals on the EMP501 can be reduced, thereby increasing the PAYE liability retrospectively from the amounts declared on the EMP201 in the previous 6 months. Penalties and interest will then be calculated on the increased PAYE liability and shown on the employer’s statement of account.
If the employer so wishes, a ‘Request for Remission’ process can be made by the employer to motivate a concession on the penalties in terms of section 218 of the Tax Administration Act. If the employer follows this route, it is best to make use of the services of a competent tax practitioner who has experience of the SARS dispute processes.