President Ramaphosa announced an economic support package amounting to 10% of South Africa’s GDP. This package provided further relief in terms of PAYE, SDL and Corporate Income Tax.
Here’s what you need to know in relation to the Pay As You Earn (PAYE) and Corporate Income Tax relief measures introduced:
In order to qualify for the relief, you need to meet certain criteria
- You (i.e. if you trade in your personal capacity) or your company, partnership or trust (referred to hereafter as “company”) must have a gross income of less than R100 million
- The R100 million limit applies to the financial year that we are currently in – that is, years ending on or after 1 April 2020 (but before 1 April 2021)
- Most owner-managed businesses in South Africa have a February year end. If your business falls into this category, it would apply to your financial year ending 28 February 2021
- Property rental companies and investment companies would more than likely not qualify. If your entity derives more than 10% of its income from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer, it would not qualify for the relief measures.
- You must be tax compliant.
2. So you qualify, now what?
You can defer a portion of your PAYE payments that fall due over the course of the next four months and you can defer a portion of your provisional tax liabilities that fall due between 1 April 2020 and 31 March 2021.
In short, SARS is giving you a soft loan. This works as follows:
Pay As You Earn (PAYE)
- For payments due on 7 May 2020 (and for the 3 payment periods thereafter), 35% of the PAYE liability can be deferred.
- So, on 7 May 2020, 7 June 2020, 7 July 2020 and 7 August 2020, you would only pay 65% of what you would normally pay over to SARS.
- The deferred amounts need to be paid back to SARS in six equal instalments commencing on 7 September 2020 and ending on 5 February 2021.
- If your first provisional tax payment falls due between 1 April 2020 and 30 September 2020, you are only required to pay 15% of the amount that you would ordinarily have paid.
- If your second provisional tax payment falls due between 1 April 2020 and 31 March 2021, the total of your first and second provisional tax payments only need to equal 65% of your total tax liability.
- The shortfall in taxes must be paid back to SARS 6 months after your financial year end in order to avoid interest charges.
- The aforementioned relief also applies to qualifying microbusinesses in relation to interim payments (with some nuances).
Skills Development Levy and Carbon Tax
- A four-month holiday for companies skills development levy contributions and a three-month delay for the filing and payment of carbon tax will be introduced.
There’s also been an extension of time granted by SARS to respond to tax related issues:
With regards to the below items, the business days falling within the lockdown period will not be counted for purposes of calculating the time periods specified in the Tax Administration Act:
– Determination of prescription periods
– Deadlines for the submission of objections and appeals
There are further extensions granted as well but we would recommend that you discuss these with a tax practitioner for detailed guidance.
If you require assistance or clarification re any of the above, please don’t hesitate to contact one of our PKF Octagon Partners.
The aforementioned information is based on the Draft Disaster Management Tax Relief Administration Bill and is correct as of 21 April 2020. As this bill is refined, some of the information contained in this document may become outdated.
No information provided herein may in any way be construed as legal and/or tax advice. Professional advice should be sought with reference to specific background facts before any action is taken based on the information contained herein. We hereby disclaim any responsibility should any person act upon the contents of this publication without due consultation with reference to specific background facts. Accordingly, no person shall have any claim of any nature whatsoever arising out of, or in connection with, the information provided herein.