
<p><em>By Graham Viljoen, Nina Keyser, Shirleen Ritchie, Yashika
Govind, Lumen Moolman and Bianca de Klerk from Webber Wentzel</em></p>



<p>The address by President Cyril
Ramaphosa on Monday, 23 March 2020, set out certain fiscal relief measures to help
small and medium enterprises (SMEs)
and vulnerable firms mitigate cash flow constraints as a consequence of the COVID-19
outbreak. Certain of these measures will be implemented through the tax system
and aim to use the tax system as a means of easing the liquidity constraints
currently faced by businesses. Specific detail on these measures will be published
by National Treasury in the coming days.&nbsp;
We provide a summary of the tax proposals set out in the address by the
President below.</p>



<p><strong><em>Support for businesses:</em></strong></p>



<ul><li><strong>Pay as you earn</strong></li></ul>



<p>SMEs with a turnover of less than ZAR50&nbsp;million‑</p>



<ul><li>may defer 20% of their prospective pay-as-you-earn (PAYE) liabilities over the next four months; and </li><li>may defer a portion of their provisional corporate income tax payments without penalties or interest over the next six months.  </li></ul>



<p>The deferral of provisional tax
payments should apply to the first and second provisional tax payments as well
as potentially the third top-up payment. &nbsp;</p>



<p>In order to qualify for these
deferrals, the enterprise must be fully tax compliant. &nbsp;Enterprises can check their tax compliance status
via SARS eFiling. &nbsp;We look forward to
additional clarity around whether an application will need to be submitted to
SARS or whether the relief applies automatically.</p>



<p><strong><em>Support for employers and employees:</em></strong></p>



<ul><li><strong>Employee Tax Incentive</strong></li></ul>



<p>Government has proposed an additional
tax subsidy in the amount of up to ZAR500 per month for the next four months
per qualifying employee in the private sector.&nbsp;
</p>



<p>The employment tax incentive (ETI) is
paid to employers who employ qualifying employees (including the youth) and is
considered a labour cost sharing mechanism between government and the private
sector to incentivise employment.&nbsp; The
existing ETI is aimed at supporting qualifying employees who earn below ZAR6&nbsp;500
per month on a sliding scale based on salary where the employer is registered for
Employees Tax.&nbsp; </p>



<p>The employer is entitled to reduce the
total amount of its PAYE liability by setting off the ETI amount calculated in
respect of that month.&nbsp; Where there is no
PAYE to set off against the ETI amount, the employer will be entitled to a
reimbursement of the total ETI amount available as at the end of each PAYE
reconciliation period.</p>



<p>A further proposal aims at reducing the
reimbursement period to a monthly period.</p>



<ul><li><strong>Compensation Fund</strong></li></ul>



<p>Any employee who falls ill pursuant to exposure
to Covid-19 at work will be entitled to claim from the Compensation Fund.&nbsp; Broadly speaking, claimants are required to
include such compensation in their gross income for tax purposes.&nbsp; The amount is, however, exempt from normal tax
in accordance with section 10(1)(gB) of the Income Tax Act. </p>



<ul><li><strong>UIF – Temporary Employee Relief Scheme</strong></li></ul>



<p>Government proposes utilising the
Temporary Employee Relief Scheme (TERS)
to enable companies to pay employees and avoid retrenchments.&nbsp; TERS was launched in December 2019 and is
aimed at assisting businesses who face temporary constraints that will result
in retrenchments.&nbsp; The allowance will be
in the form of a wage payment directly to employees. </p>



<p>This should support SMEs and other
vulnerable firms who are faced with a loss of income to provide support to
workers. &nbsp;</p>



<ul><li><strong>UIF and SDL</strong></li></ul>



<p>Government is investigating a reduction
in employer and employee contributions to the Unemployment Insurance Fund and a
reduction in Skills Development Levies. </p>



<p>The proposal entails using actuarial
reserves in the Unemployment Insurance Fund to support workers of SMEs and
vulnerable firms who are faced with loss of income and whose employers cannot
provide support.&nbsp; </p>



<p>The relief outlined by the President to aid SMEs and vulnerable firms and employees during this time is welcomed. We will provide an update as more detail becomes available.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Tax relief proposed by the President – image LR

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SMEs

Covid-19: Tax relief proposed by the President

How COVID-19 is impacting SMEs in Africa

How Kenyan SME’s are coping with reduced business due to COVID-19

ECIC’s Portia Dube on plans to expand into the francophone region

Here’s how Credit Bank is empowering women-led businesses in Kenya

How Kenyan SMEs can contribute more to the country’s GDP in 2020

Here’s why small businesses in Kenya struggle to grow

The role of fintechs in SME growth on the continent

SMEs find going tough as SA’s economy contracts

Tackling South Africa’s SME funding gap

FNB Business CEO: SME support can help lift SA out of recession

How the shared value model can help in solving social issues

Kountable Founder talks about how technology will transform global trade

FASA’s Akhona Qengqe on transformation, job creation

SMEs must contribute more to SA’s economy – Bonang Mohale

Benefactors CEO Olivia Zank on easing SMEs access to funding

This empowerment firm aims to help grow 400 African start-ups to the next level

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SMEs

Covid-19: Tax relief proposed by the President

How COVID-19 is impacting SMEs in Africa

How Kenyan SME’s are coping with reduced business due to COVID-19

ECIC’s Portia Dube on plans to expand into the francophone region

Here’s how Credit Bank is empowering women-led businesses in Kenya

How Kenyan SMEs can contribute more to the country’s GDP in 2020

Here’s why small businesses in Kenya struggle to grow

The role of fintechs in SME growth on the continent

SMEs find going tough as SA’s economy contracts

Tackling South Africa’s SME funding gap

FNB Business CEO: SME support can help lift SA out of recession

How the shared value model can help in solving social issues

Kountable Founder talks about how technology will transform global trade

FASA’s Akhona Qengqe on transformation, job creation

SMEs must contribute more to SA’s economy – Bonang Mohale

Benefactors CEO Olivia Zank on easing SMEs access to funding

This empowerment firm aims to help grow 400 African start-ups to the next level

News Tips

Advertise With Us

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