- DRAFT BILLS AND EFFECTIVE DATES
The following measures will be given legal effect in terms of two bills to be tabled when Parliament re-convenes later this year for retrospective enactment. These bills are the Disaster Management Tax Relief Bill and the Disaster Management Tax Relief Administration Bill. The draft bills alongside their draft explanatory memoranda, will be published for public comment on the National Treasury and SARS websites by 1 April 2020.
The Tax Bills once promulgated will be effective from 1 April 2020.
- EMPLOYMENT TAX INCENTIVE (“ETI”) PROPOSAL
In order to minimise the loss of jobs during this critical period, Government proposes expanding the ETI programme for a limited period of four months, beginning 1 April 2020 and ending on 31 July 2020 as follows:
- Increasing the maximum amount of ETI claimable during this four-month period for employees eligible under the current ETI Act from R1 000 to R1 500 in the first qualifying twelve months and from R500 to R1 000 in the second twelve qualifying months.
- Allowing a monthly ETI claim in the amount of R500 during this four-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 employment tax incentive reimbursements from twice a year to monthly, as a means of getting cash into the hands of tax compliant employers as soon as possible.
This expansion will, however, only apply to employers that were registered with SARS as at 1 March 2020.
- ETI EFFECTIVE DATE
The proposed amendments will apply for a period of four months and are deemed to have come into operation on 1 April 2020 and end on 31 July 2020.
- EMPLOYEES’ TAX PROPOSAL
Employers may defer 20% of their employees’ tax liability, limited to the four-month period 1 April 2020 – 31 July 2020 without SARS imposing penalties and interest for the late payment of Pay-As-You-Earn (“PAYE”). In other words, the first reduction will apply to the employees’ tax payment due to SARS by 7 May 2020 (in relation to April 2020).
The deferred PAYE must be paid to SARS in equal instalments over six months from 1 August 2020. i.e. commencing with the PAYE payment due to SARS by 7 September 2020.
This proposal is applicable to any compliant resident (or resident representative) employer who has an annual turnover not exceeding ZAR 50 million. Please note interest and penalties will apply if the employer has understated the PAYE liability for any of the four months.
- EMPLOYEES TAX EFFECTIVE DATE
The proposed amendments are deemed to have come into operation on 1 April 2020 and end on 31 January 2021.
- PROVISIONAL TAX PROPOSALS
National Treasury proposes to assist compliant small to medium size businesses to better manage their cash flows by reducing the amount of provisional tax that they are required to pay during the period 1 April 2020 and ending on 31 March 2021 without incurring any penalties and or interest as a result of the reduced payment.
First provisional tax payment due between 1 April 2020 and 30 September 2020 for qualifying companies will only be based on 15% of estimated total tax liability;
Second provisional tax payment due between 1 April 2020 to 31 March 2021 will be based on 65% of estimated total tax liability;
The balance (being 35%) would need to be paid in full when making the third provisional tax payment i.e. the top up payment made within 6 months after year end in order to avoid the interest charges.
A company that would qualify for the above reduced provisional tax payment mechanism would need to be a company that does not have an annual turnover exceeding ZAR 50 million. In addition, the company would need to be tax compliant regarding its tax return submission and tax debts due to SARS.
- PROVISIONAL TAX EFFECTIVE DATE
First provisional tax payment due between 1 April 2020 and 30 September 2020.
Second provisional tax payment due between 1 April 2020 to 31 March 2021.
- PROPOSALS FOR INDIVIDUALS
The eligibility criteria for individuals carrying on a business have yet to be finalised, but one possibility is that they will be eligible if their turnover is less than R5 million and no more than 10 per cent of their turnover is derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer.
The relief is primarily aimed at small and medium businesses.
The correct action to follow would be to still submit your correct returns but to pay the lesser amount in terms of the relief.
At MMS, it is business as usual and you are welcome to contact us at www.mmsgroup.co.za for any assistance.
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