In late July, in response to the ongoing Covid-19 pandemic and recent unrest, President Cyril Ramaphosa announced a series of emergency tax breaks that will help affected and tax-compliant companies recover and secure the livelihood of employees.
Further details on the proposed measures were provided by the Finance Minister and the State Treasury.
The South African Revenue Service (SARS) said it will implement these tax breaks because lawful taxpayers have paid their fair share of the taxes, allowing the government to provide such a temporary safety net in times of extreme difficulty.
SARS Commissioner Edward Kieswetter said: “The first quarter of the current fiscal year had exceeded expectations and exceeded the revenue surveys for the same period over the past three years.”
Kieswetter reaffirmed SARS ‘obligation to provide taxpayers with clarity and security so that they can effortlessly meet their legal obligations and make the payment due. He said SARS will endeavor at all times to “make transactions with the organization easy and smooth for taxpayers”.
However, he sent a clear and unequivocal message that SARS is able to “identify and make it costly those who are determined not to comply with their legal obligations and commit criminal offenses through fraudulent means against the organization”.
“The use of big data, artificial intelligence and the latest technology enables SARS to offer digital services to protect taxpayers and employees during the lockdown restrictions of Covid-19 and further supports the efforts of SARS in fulfilling our mandate.”
SARS gave an overview of the aid measures for small, micro and medium-sized enterprises (SMEs) and others. The announced measures are:
- The introduction of a tax subsidy of up to 750 rupees per month for the next four months for private sector employers whose employees earn less than 6,500 rupees. This subsidy is granted within the framework of the current wage tax relief.
- Tax compliant businesses with gross income up to R100 million are allowed to defer 35% of their PAYE for the next three months with no penalties or interest.
- Tax-compliant companies in the alcohol sector can apply to SARS for a deferral of up to three months to pay excise duties.
Tax relief for the employment tax (ETI)
Tax relief under the EIT is available for a period of four months from August 1, 2021 to November 30, 2021. The first extended EIT can be requested in your EMP201 for August, SARS said. The maximum monthly amount allowed under the EIT during this period will be increased according to the following criteria:
- According to the current ETI Act, employees are entitled to between R1,000 and R1,750 per month in the first 12 qualifying months and from R500 to R1,250 per month in the second 12 qualifying months.
- Employees between the ages of 18 and 29 who are no longer entitled to the ETI because the employer has applied for ETI for these employees for 24 months or who are no longer entitled to what they were employed by the employer before October 1, 2013, from entitlement to R750 per month.
- Employees aged 30 to 65 who are not eligible for the EIT due to their age, from not eligible to R750 per month.
SARS said it will also pay monthly ETI reimbursements for the four month period instead of every six months it normally does. Refunds will begin on September 13, 2021, subject to any review or audit steps.
How to claim tax relief under the EIT:
- Record the full PAYE liability (the form calculates 100% of the PAYE payment, you cannot change this value).
- Record the calculated EIT.
- Calculate 65% of PAYE’s liability in relation to PAYE tax relief for the first three (3) months.
- Limit the ETI used to the lower calculated ETI or 65% of the PAYE liability for the first three months or 100% of the PAYE liability for the fourth month.
- Calculate the total amount payable as (65% of the PAYE liability for the first three months or 100% of the PAYE liability for the fourth month) minus the ETI used plus the SDL payable plus the UIF payable.
PAYE tax exemption period
The tax relief for PAYE is available to qualified companies for the three-month period from August 1, 2021 to October 31, 2021. The first deferment can be requested in your EMP201 declaration of August 2021, which is due by September 7, 2021.
How to apply for tax relief for PAYE:
- Fill out the EMP201 as usual with the full PAYE liability (the form calculates 100% of the PAYE to be paid, you cannot change this value)
- Calculate the total liability as 65% of the PAYE liability plus SDL liability plus UIF liability.
SARS warned that those making late payments would lose the benefits of the tax break for PAYE, and SARS will impose penalties and interest on the total amount charged.
Payment of the deferred PAYE obligation
After November 7, 2021, SARS will determine the four equal payments for the total amount you have deferred and include them in your monthly bank statement.
Payments are made over a period of four months beginning on December 7, 2021, with the last payment due by March 7, 2022.
Alcohol industry: deferment of excise duty payments on alcohol
The tax authority said that due to the restrictions on domestic sales of alcoholic beverages, tax-compliant companies in the alcohol sector can apply to SARS for a deferral of up to three months in paying excise duties.
He stressed that this could only happen if the circumstances were shown to justify the postponement. Customers must apply for a deferment under rules 105.01 through 105.04 of the Customs and Excise Tax Act 1964
the payment, and each case is examined on its merit.
“This is expected to help a significant number of companies that are under pressure for cash flow and their ability to meet payments to SARS,” it said.
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