COVID-19 Corona Virus South African Resource Portal 

What Other Assistance Is Available for Businesses That Are in Distress?

What other assistance is available for businesses that are in distress?

President Ramaphosa announced these relief measures as part of the COVID-19 economic stimulus package.

The Ministry of Finance released a media statement and draft explanatory notes on Covid-19 tax measures on 29 March. These tax measures will take effect from 1 April 2020 and are regulated in terms of the proposed Disaster Management Tax Relief Administration Bill. SARS has published an explanatory memorandum [ILH5] in the revised draft of the Tax Relief Bill on 19 May. Additionally, the Government gazetted a Notice on Expanding Access to Living Annuity Funds on 1 June.

7.1. An expansion of the Employment Tax Incentive scheme

Government has proposed to expand the existing Employment Tax Incentive programme from 1 April 2020 until 31 July 2020. Employers can claim an additional R750 per qualifying employee during this time. The calculations are explained in this User Guide and FAQs published by SARS.

These tax incentives will be paid monthly.

These are the compliance requirements to qualify for the Employment Tax Incentive scheme:

  • Employers must be registered with SARS by 1 March 2020;
  • Employers must be up to date with tax return submissions; and
  • Employers must not have outstanding tax debt.

7.2.  Deferred payment of PAYE

Government proposed the following tax measures for tax compliant businesses with an annual turnover of less than R100 million beginning 1 April 2020 to 31 July 2020:

  • Deferral of payment of 35% of the PAYE liability, without SARS imposing administrative penalties and interest for late payment.
  • The deferred PAYE liability must be paid to SARS in equal instalments over the six month period commencing on 1 August 2020, i.e. first payment must be made on 7 September 2020.

This proposal will not apply to employers that:

  • has failed to submit any tax returns
  • has an outstanding tax debt

The Employers’ Covid-19 Tax Relief User Guide has more details.

7.3.  Deferred payment of provisional tax liability

The Government proposed the following tax measures for tax compliant businesses with an annual turnover of less than R100 million) beginning 1 April 2020 to 31 March 2021:

  • Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing administrative penalties and interest for pate payment of the deferred amount.
  • The firsts provisional tax payment due from 1 April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability.
  • The second provisional tax payment from 1 April 2020 to 31 March 2021 will be based on 65% of the estimated total tax liability.
  • The full tax liability must be paid with the third provisional tax payment in order to avoid interest charges.

This proposal will not apply to employers that:

  • has failed to submit any tax returns
  • has an outstanding tax debt

The eligibility criteria for sole proprietors still has to be finalised.

7.4. Skills Development Levy payment holiday

Employers who are registered for SDL do not have to declare and pay SDL to SARS from May to August 2020.

7.5. Other new tax relief measures announced on 23 April

These additional measures were announced :

  • Fast-tracking of value-added tax (VAT) refunds;
  • Three-month deferral for filing and first payment of carbon tax liabilities;
  • A deferral for the payment of excise taxes on alcoholic beverages and tobacco products:
  • Postponing the implementation of some Budget 2020 measures:
  • A case-by-case application to SARS for waiving of penalties;
  • Increasing the deduction available for donations to the Solidarity Fund; and

Adjusting pay-as-you-earn for donations made through the employer.

7.6. Temporary relief from Pension Fund Scheme Contributions

  • The Financial Sector Conduct Authority (FSCA) has  announced that employers who are in financial distress due to the Covid-19 pandemic and are unable to pay their full contributions to employee retirement funds,  have been given a temporary reprieve.
  • If these employers urgently reach agreement with the specific retirement funds on rules to deal with the temporary suspension or postponement of payments, and submit these rules without delay to the FSCA, these employers will not face prosecution for non-compliance in terms of the Pension Funds Act, 1956.
  • The communication issued by FSCA can be found here.

7.7. Expanded access to living annuity funds

This measure will result in individuals who receive funds from a living annuity being temporarily allowed to immediately either increase (up to a maximum of 20 percent from 17.5 percent) or decrease (down to a minimum of 0.5 percent from 2.5 percent) the proportion they receive as annuity income. This will assist individuals who either need cash flow immediately or who do not want to be forced to sell after their investments have underperformed. Please see this official statement by the Government for more information.

7.8. Industrial funding from the Industrial Development Corporation

The Industrial Development Corporation has published information about its interventions in response to Covid-19. The IDC’s immediate priority is to focus on sectors critical to:

  • limit the spread and immediate impact of the virus
  • support supply chains critical for the economy

7.9. South African Government COVID-19 Economic Stimulus Package

On 21 April President Ramaphosa announced a R500 billion stimulus package for the South African economy. More specific details will be released in the coming weeks, but what details are available have been summarised below.

The 2020/21 Budget has been re-worked to accommodate the problems stemming from the COVID-19 pandemic. Therefore, the main funding streams for this stimulus package are re-prioritised expenditure from other areas of the previous budget, the UIF, other local sources and global partners or other international organisations such as the World Bank and the International Monetary Fund.

R200 billion has been earmarked for a loan guarantee scheme for businesses with an annual turnover of less than R300 million. This scheme is in partnership with major banks, Treasury and the South African Reserve Bank. On 12 May the Government announced the official opening of this loan scheme, and that the. initial set of participating banks (Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank) are ready to accept loan applications from eligible businesses which bank with them. More information on this loan scheme can be found through the above listed banks, and in this official guide published by the Government.

The rest of the funding is being prioritised for municipalities, extra social security assistance, R40 billion has been set aside for businesses who cannot pay their staff and R100 billion has been prioritised for job protection and job creation.

On 24 June the Finance Minister announced the revised National Budget for the Financial Year 2020/2021. Here, the government made provision for an additional R34.1 billion on expenditure for healthcare and R25.5 billion allocated to the Social Development Department to support the most vulnerable and destitute via the Special Relief of Distress grant. R100 billion expenditure has been allocated to address the increasing unemployment problem in South Africa. No additional sector-specific bail-out schemes were announced which relate directly to the tourism and travel industries.

Last Updated on