#2 -COVID 19: Tax Relief Measures – available to NPO’s?
The government has promised various relief measures announced on 29th March 2020 in a media statement and draft explanatory notes issued by the National Treasury.
The relief is offered to assist the cash flow of small and medium sized businesses (defined to include businesses with an annual turnover not exceeding R50 million). The rationale provided is that “small to medium sized businesses play an important role in stimulating economic activity, job creation, poverty alleviation as well as improvement of living conditions and are expected to be the hardest hit.”
If organisations usually generate their own income from activities that they are now no longer able to carry out, or are responding to the crisis by carrying out new activities that are not funded, then they could be experiencing difficult cash flow conditions.
The main tax measures and relief that we understand are available to small and medium sized non-profits and businesses alike are summarised below:
Partial deferral of the payment of PAYE
In order to assist the cash flow of tax compliant small to medium sized “businesses”, for a limited period of 4 months from 1 April 2020 to 31 July 2020, these employers may defer (delay) payment of 20% of the organisation’s monthly PAYE liability without SARS imposing penalties and interest for late payment. This deferred amount must then be paid to SARS in equal instalments over the six month period starting for the month August 2020, with the first payment to be made by 7 September 2020.
NOTE: This relief will not apply to employers that have failed to submit any tax returns (not only PAYE returns) or have tax debt in excess of R100 (unless an installment agreement with SARS is in place).
This relief amounts to an interest free loan from SARS and provides cash flow relief, particularly to those with larger payrolls who continue to pay their employees during the lockdown.
Practically, by way of an example: Say the total monthly PAYE liability is R100,000 which is declared on the EMP201. Note that this excludes UIF and SDL. The organisation will pay only 80% of this to SARS each month for the 4 months, that is R80,000 per month. The R20,000 per month deferred for 4 months will amount to a total R80,000 interest free loan. This must be repaid in six equal instalments of (R80 000/6) R13,333.33 each month, together with the monthly PAYE amount for each month from the August payroll, with the first payment to be made by 7 September 2020.
If the resulting interest-free loan is significant to your organisation and helpful to current cash flows, and you know that you can keep a tally of the amounts involved and manage cash flows carefully in order to make the repayment from September 2020 to February 2021, we recommend that you reduce your SARS payment of PAYE by 20% before you release the payment for April by 7 May 2020, and for each of the next 3 months up to and including July 2020. Note that failure to repay the amounts on time will attract penalties and interest.
Employment Tax Incentive (ETI) Relief
The ETI programme was introduced a few years ago to promote employment, particularly of young workers between the ages of 18 and 29 and is administered through the PAYE system. A monthly ETI is claimable from SARS per qualified employee (aged between 18 and 29 and earning a monthly remuneration of less than R6,500). The ETI can only be claimed for the first 24 months of the qualifying employee’s employment. Certain non-profit organisation have taken advantage of the ETI programme by employing qualifying workers, and have claimed back the ETI from SARS.
For a limited period of 4 months from 1 April 2020 to 31 July 2020, the ETI programme is be expanded, as follows:
- Increasing the maximum amount of ETI claimable during this 4 month period from R1,000 to R1,500 per month in the first qualifying 12 months and from R500 to R1,000 in the second 12 qualifying months.
- Allowing a monthly ETI claim of R500 during this 4 month period for any other employees, earning less than R6,500 monthly, from the ages of –
- 18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect to these employees for 24 months already; and
- 30 to 65 who, otherwise would qualify, but were not eligible for the ETI due to age, and who were employed after 1 October 2013.
- The ETI reimbursement payments are also made much more regular; instead of twice yearly, the amount due will now be paid out monthly
Partial deferral of provisional tax payments
This relief too is to assist the cash flow of small to medium sized businesses, who have an obligation to pay provisional tax. In this case, it is unclear if this relief is offered only to companies or if this relief is also available to individuals carrying on business.
NOTE: Approved Public Benefit Organisations (PBO’s) are not required to make provisional tax payments and therefore this relief is not relevant to PBO’s.
For non-profit entities that are not PBO’s, this relief may be relevant. The details of the payment deferral relief are available in the draft explanatory notes on COVID-19 tax measures. See the links below.
ARE YOU CONCERNED ABOUT YOUR ORGANISATION’S TAX MATTERS IN GENERAL?
If you are concerned that your organisation is:
- not registered with SARS for income tax purposes, or
- not registered with SARS as an employer, or
- has not submitted all the necessary tax returns, or
- is not up to date with all payments due to SARS, or
- is not aware of the obligations and benefits available to organisations…
…then please do contact us to assist you in getting the organisation’s tax affairs in order.