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Relief updates

New Covid-19 Relief Measures - Draft Bill

2021/08/11
Relief updates

This circular deals with the PAYE and Employment Tax Incentive proposals. Updated relief measures in terms of the Draft Taxation Laws Amendment Bill and explanatory notes published on 28 July 2021.

Download - Explanatory notes on the emergency tax measures in response to the continuing covid-19 pandemic and recent unrest in the country

PAYE Deferral
 The purpose of this relief is to assist the cash flow of small to medium sized businesses (i.e. a business (including a partnership, individual or trust) with an annual turnover not exceeding R100 million for the year of assessment ending on or after 1 April 2021 but before 1 April 2022) which have employees in respect of whom PAYE is payable.

The business must have been registered for PAYE on 25 June 2021 and its gross income for the current year of assessment must not include more than 20% consisting of gross interest, dividends, foreign dividends, royalties, annuities, gross rental from the letting of fixed property (except where the 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) and any remuneration from an employer.

In respect of the PAYE liabilities for the three months from August to October 2021 

  • Only 65% of the total amount of PAYE payable in each of these months must be paid on time i.e. by the 7 of the following month. 35% is deferred without penalty or interest.
  • The total amount deferred in respect of these 3 months must be paid to SARS in 4 equal monthly instalments. The first amount is payable on 7 December 2021 and the same amount in the following 3 months.

This relief will to those employers (or representative not be available employers
of non-resident businesses) if the employer –

  • has failed to submit any return to SARS (not only in respect of PAYE) in the prescribed form and manner and by the due date;
  • has any outstanding tax debt in excess of R100 (unless an instalment agreement with SARS is in place).

It must be realized therefore that if employers are in default with any returns or payments, this relief is not available and, if full PAYE is not paid, the usual penalties and interest will apply. Furthermore, penalties and interest will apply if PAYE liabilities are understated for any of the 4 months referred to above.

Employment Tax Incentive (ETI) Relief
This ETI programme was instituted to promote employment, particularly of young workers (i.e. between the ages of 18 and 29).

This wage subsidy relief is administered through the PAYE system and is applicable in respect of a qualifying employee between the ages of 18 and 29 who has a monthly remuneration of less than R6 500. The maximum monthly ETI claimable per qualifying employee is limited to R1 000 in the first year of employment and R500 in the second year of employment. The monthly ETI can only be claimed for the first 24 months of the qualifying employee's employment.

For the limited period of 4 months from 1 August 2021 to 30 November 2021, so as to minimize job losses, the ETI programme is to be expanded as follows –

  • Increasing the maximum amount of ETI claimable during this 4 month period from R1 000 to R1 750 in the first qualifying 12 months and from R500 to R1 250 in the second 12 qualifying months.
  • Allowing a monthly ETI claim of R750 during this 4 month period for employees from the ages of –
  • 18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for 24 months, and
  • 30 to 65 who are not eligible for the ETI due to their age.

  • Accelerating the payment of the ETI reimbursements from twice a year to monthly as a means of getting cash in the hands of tax compliant employers as soon as possible.

This ETI expansion only applies to employees who were registered with SARS on 25 June 2021.

This ETI relief will not be available if such employer –

  • has failed to submit any return to SARS in the prescribed form and manner and by the due date;
  • has any outstanding tax debt in excess of R100 (unless an instalment agreement with SARS is in place).

Further Details
All these announcements eventually need to be promulgated by Parliament.2 August 2021