On 23 March 2020 President Cyril Ramaphosa announced that South Africa will be in an enforced nation-wide lockdown for 21 days with effect from midnight on Thursday 26 March 2020.
Together with this announcement, certain economic interventions were announced by the President.
These include the establishment of a Solidarity Fund to focus on the spread of the virus, care for the ill and support for those whose lives are disrupted; the development of a safety net to support persons in the informal sector; allowing for wage payment to occur through a Temporary Employee Relief Scheme enabling companies who are in distress due to COVID-19 to continue to pay employees rather than go through a process of retrenchment and to support employees who fall ill through the Compensation Fund.
The Department of Small Business Development has made R 500 million available to assist Small and Medium Size Enterprises (“SME’s”) that are in distress, the Industrial Development Corporation (together with the Department of Trade, Industry and Competition) has created a package of more than R 3 billion for industrial funding to assist vulnerable firms and specifically to fast track companies critical to fighting the virus and the Department of Tourism has made available R 200 million to assist SME’s in the tourism and hospitality sectors.
In terms of tax relief measures:
- A tax subsidy will be provided of up to R500 per month, for the next four months, for private sector employees earning below R 6 500. This will be provided under the Employment Tax Incentive. South African Revenue Services (“SARS”) will seek to accelerate the payment of employment tax incentive reimbursements from twice a year to monthly.
- Tax compliant businesses, with turnover of less than R 50 000 000, will be allowed to delay 20% of their Pay-As-You-Earn (P.A.Y.E) liabilities over the next four months as well as a portion of their provisional corporate income tax payments without penalties or interest.
- In addition there may be a temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skills Development Fund. If necessary, consideration will be given to the utilisation of Unemployment Insurance Fund Reserves to support workers in Small and Medium Size Enterprises and other vulnerable firms where companies are unable to continue to support them.
We will communicate with you further as more details become available.
Director Corporate and International Tax Johannesburg