(source: SARS)
In response to COVID and the KZN looting, SARS have published a series of notes on relief measures available to businesses. Please also see our comments in italics in relation to the practical issues around each step.
Extension of the expanded Employment Tax Incentive (ETI) age eligibility criteria and amount claimable
In 2020, Parliament passed the Disaster Management Tax Relief Act, 2020 and the Disaster Management Tax Relief Administration Act, 2020, containing exceptional tax measures which formed part of the fiscal package aimed at assisting taxpayers who experienced cashflow constraints as a result of the COVID-19 pandemic and required national lockdown.
One of the exceptional tax measures included in the above-mentioned Acts was an expansion to the Employment Tax Incentive (ETI). This expansion was provided to assist employers retain employees, thus reducing the risk of low-income earners losing their employment as a result of the lockdown.
The expanded ETI was structured as follows:
- A R750 increase to the maximum monthly amount of ETI allowable.
- Allowing the above mentioned monthly ETI claim to apply to employees not classified as qualifying employees
- The proposal allowed for the calculation of the ETI claim based on actual remuneration paid in that month where the employee worked less than 160 hours a month (the remuneration paid to the employee did not need to be grossed-up).
- Accelerating the ETI reimbursements from twice a year to monthly.
- The ETI claimable would still need to be grossed down for actual hours worked.
- The inclusion of an anti-avoidance measure aimed at limiting potential abuse where an employer claimed the incentive despite having significantly reduced the employees’ wages. This anti-avoidance measure applied to wages below R2 000.
- The expansion applied for a period of four months and was deemed to have come into operation on 1 April 2020 and ended on 31 July 2020. This first period has ended.
Due to the recent issues and continuation of COVID, it has been proposed that the ETI expanded relief above be extended for the four-month period from August 2021 to November 2021.
To qualify for this relief, the employer must be tax compliant and registered with the South African Revenue Service (SARS) as an employer by 25 June 2021.
Please note that it is important that employers not only check the correct way to do this claim on their payroll system, but also check the results carefully. Payroll software vendors have done their best to get this right, but it is short notice and it is up to employers to check they are claiming correctly. SARS won’t give you any leeway for honest mistakes.
Extension of the deferral of the payment of employees’ tax liabilities for tax compliant small to medium sized businesses.
Background
One of the exceptional tax measures introduced in 2020 was the deferral by employers of the payment of employees’ tax liabilities (PAYE) to SARS for a limited five-month period. This PAYE deferral was structured as follows:
- Deferral of payment of 35 per cent of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
- The deferred PAYE liability had to be paid to SARS in equal instalments over the six-month period commencing on 1 September 2020, (i.e. the first payment had to be made on 7 October 2020).
- This applied only to SMEs – small or medium sized businesses conducted by a company, partnership, individual or trust with a gross income not exceeding R100 million for the year of assessment ending on or after 1 April 2020 but before 1 April 2021.
- The inclusion of a limitation stating that gross income should not include more than 20 per cent of income derived from interest, dividends, foreign dividends, royalties, rental from letting fixed property, annuities and any remuneration received from an employer,
- Rental income derived from the letting of fixed property excludes rental income derived by a person whose primary trading activity is the letting of fixed property and substantially the whole of the gross income is rental from fixed property.
- The requirement that the employer is tax compliant in terms of the Tax Administration Act when making a reduced payment.
- The relief measure applied for a limited period of five months beginning 1 April 2020 and ending 31 August 2020.
This relief has been extended for another limited three-month period as follows with the same rules as above:
- Deferral of payment of 35 per cent of the PAYE liability, without SARS imposing administrative penalties and interest for the late payment thereof.
- The deferred PAYE liability for the three-month period of August to October 2021 must be paid to SARS in equal instalments over a four-month period commencing on 1 November 2021, (i.e. the first payment must be made on 7 December 2021).
- To qualify for this relief measure, the employer will need to have been registered with SARS as an employer by 25 June 2021.
Deferral of Excise Duties on Alcoholic beverages
In 2020, the rules to the Customs and Excise Act, 1964, were amended to insert rules 105.01 to 105.04 to permit applications to SARS for deferral of payment of excise duties in cases of temporary financial constraint. These rules were applied to assist tax compliant licensees in the alcohol sector when restrictions were imposed on the sale of alcoholic beverages in December 2020.
With the ongoing challenges, SARS will provide deferrals of up to three months for payments by tax compliant licensees in the alcohol sector, on application setting out the circumstances justifying a deferral.