There is deep concern over the impact that Covid-19 may have on business. Below is a summary of business relief that may be available that was prepared by one of our service providers, The TaxHouse. Stellentrust wish you everything of the best during this difficult time and trust that you will find this helpful.
By the Taxhouse
We find ourselves in the 21-day lockdown and the economic reality is hitting home, especially for small business and those businesses that have either had to close their doors or significantly reduce operations.
Government and Business have introduced some relief measures to assist with the pressure. Many of our clients and stakeholders are not sure how to access these measures or to determine if they even qualify.
The Tax House wants to assist you in understanding these relief measures and we are here to help you implement them over the course of the coming months.
What are the Available Relief Measures?
There are four general ways in which businesses can claim relief:
- 1. Relief for employees via the UIF system and Compensation Fund (Either directly by employee or paid to employer on behalf of employee);
- 2. Tax relief such as the amended Employment Tax Incentive Scheme and tax holidays for PAYE and Provisional tax;
- 3. Various funds and relief facilities (SM ME, self- employed hawkers and spaza shops, IDC, Tourism, Solidarity, SA Future Trust, Rupert and Remgro Funds, Other Funds);
- 4. Business to business relief;
1. Relief for Employees via UIF and Compensation Fund Relief
1.1 C-19 Temporary Employer / Employee Relief Scheme
The C-19 Temporary Employer/Employee Relief Scheme ("C-19 TERS ") came into effect on 26 March 2020. It enables businesses to pay employees directly during this period to avoid retrenchment. The employer will receive funding directly from the UIF Fund to pay the employee themselves rather than the employee having to apply to the Department of labour.
C·19 TERS is a special benefit created under the Unemployment Insurance Fund (UIF) to encourage employers to continue paying their employees. The program specifically compensates the employer so that they in turn can pay their employees that would otherwise lose income due to C·19 lockdown.
A distressed business will only be funded if it meets certain key requirements:
- It has been compliant with UIF legislation.
- The business has had to dose for a 3 month or lesser period and is in financial distress, directly due to the C·19 pandemic.
- The salary benefits will be capped at a maximum monthly salary of R17 712 per employee. The claim will be limited to between 38% and 60% of the monthly salary per employee. In other words, an employee earning a monthly salary more than R17 712 will receive maximum benefit of R 6 730 per employee (R17,712 X 38%)
- Where an employee’s income falls below the minimum wage of the specific sector. the employer (on behalf of the employee) will be paid a replacement income equal to the minimum wage of the respective sector.
- The company must comply with the application procedure for the relief scheme.
The C-19 TERS is not linked to the UIF normal benefits, in other words, the accumulation of one credit for every 4 (four) days worked will not apply.
An email must be sent to email@example.com to retrieve the application forms. It is important that ALL forms are completed and that if you have more than 10 employees, that a Memorandum of Agreement is signed.
1.2 UIF and SDL Relief
The Government is exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund and employer contributions to the Skill Development Fund. The mechanism for this is not yet clarified.
If it becomes necessary, the Government will utilise the reserves within the UIF system to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support.
The Minister of Employment and Labour announced a National Disaster Benefit relief through the UIF scheme. This benefit will be at a flat rate equal to the minimum wage (R3,500) per employee for the duration of the shutdown or a maximum period of three months, whichever period is the shortest. The employer would have to apply for this benefit and employer may have to pay the employees before receiving the benefit from the UIF thereby creating a cash flow challenge for the employer. The employer and employee would both have to sign the application for the benefit.
Employers may not have had to dose its doors however the employee could receive a C-19 TERS illness benefit due to the fact that the employee is in self-quarantine for 14 (fourteen) days as a result of the C-19 pandemic. Confirmation will have to be provided to the Department of Labour. Where an employee is quarantined for more than (fourteen) days, a medical certificate from a medical practitioner must be submitted together with the payment continuation form. This benefit is paid directly to the employee.
All of the above Claims do apply to domestic employees so long as the employer is UIF compliant.
For more information refer to
1.3 Ill Employees can Claim Through the Compensation Fund
Any employee who falls ill through exposure to C-19 at their workplace can apply to the Compensation Fund for a benefit.
On-line claims can be processed online using www .labour.gov.za.
2. Tax Relief
2.1 Subsidy for Low Wage Earners
A tax subsidy is available to employers of up to R500 per employee per month beginning 1 April 2020 and ending 31 July 2020. The employers will only receive this subsidy for employees earning below R8 500 under the amended Employment Tax Incentive Scheme (ETI). The subsidy's aim is the prevention of layoffs of low-income staff members.
Currently, an ETI program exists and only applies to new employees between the ages of 18 to 29 and limited to R1 000 per employee in year 1 and R500 per employee in year 2.
The relief now provides an additional R500 subsidy for all employees between the ages of 18 and 65 years old for the 4-month period.
2.2 Accelerated Tax Incentive Reimbursements
The normal ETI benefits have always allowed an employer to reduce its monthly PAYE liability to SARS. There were some circumstances where the employer may end up in a situation where the ETI benefit exceeded the PAYE monthly liability. In this circumstance, SARS would have to refund the employer. This historically was only done twice a year (February and August).
This specific C-19 relief now states that where an employer has the situation where the ETI benefit exceeds the PAYE liability, SARS will now be refunding this amount monthly. The above does NOT apply to UIF and SDL.
2.3 Delay 20% PAYE Over the Next Four Months
Provided that the business is tax compliant and has a turnover of less than R50 million, a business can delay 20% of its PAYE liability commencing from 7 May 2020 (i.e. the April salary run). This relief will last for a period of four months and these shortfall payments will not result in penalties or interest levied by SARS.
The relief is aimed at small business to assist with cash flow. It is important to “save” these relief funds if possible as this PAYE saving is repayable in equal instalments commencing 7 September 2020 to 7 February 2021.
Please note that the relief will not be available to employers who did not submit the EMP 201 returns correctly and will not apply to any debt currently owed to SARS. If an employer does not submit its EMP 201 returns at all or understates its PAYE liability, SARS will levy penalties and interest.
2.4 Defferal of the Payment of Provisional Tax Liability for SMME
This only applies to tax compliant trusts and companies with a turnover of less than R50 million and to tax compliant individuals (i.e. sole proprietors or partnerships) with a turnover of no more than R5 million (to be confirmed by government). No more than 10% of this can be derived from passive income. The deferral of provisional tax applies for a period of twelve months commencing 1 April 2020 to 31 March 2021. These shortfall payments will not result in penalties interest levied by SARS if held back by a qualifying taxpayer.
The R50 Million threshold is determined by looking forward and not backward, in other words, if a person predicts turnover will be less than R50 Million from 1 April 2020 to 1 April 202 1, they would qualify even if they exceeded R50 Million in the previous year.
In a nutshell, SARS provides 35% tax relief for a period of 12 months.
2.5 How does this apply?
A taxpayer will only have to pay 15% of the total estimated tax liability when its first provisional tax payment is due (instead of 50% in normal circumstances). The taxpayer will pay 50% of the total estimated tax liability when the second provisional tax payment is due (No change here). The unpaid 35% is payable within 6 months of year end. This would be the third or top up payment.
What is important to note is that the taxpayer also has to pay its first provisional payment for the following year at the same time as this catch up payment will need to be made. Your cash flows must be managed accordingly.
Relief will not be available to a provisional taxpayer who fails to submit its return or currently owes money to SARS. Interest and penalties will be levied where the taxpayer did not qualify for the relief.
3. Funds and Relief Facilities
3.1 SMME - Debt Relief and Growth Relief
R500 million is available in this fund. The following qualifying criteria apply:
- Business must have been registered with CIPC by 28 February2020 (therefore no sole proprietors or partnership);
- Company must be 100% owned by South African Citizens.
- Employees must be 70% South Africans.
- Proof available that the business has been negatively affected by C-19;
- Priority given to businesses owned by women, youth and people with disabilities and;
- SARS and UIF compliant.
- Financial statements. bank certificates, 6-months cashflow statements, FICA and other documents will accompany the application.
The first type of SMME relief is debt relief finance scheme for business will be made available to SMME’s that are negatively affected, directly or indirectly due to the Coronavirus pandemic for a period of 6 months for payment of employee, rates, taxes and working capital.
Please note that no relief will be provided to, the payment of employees if the employer or employee has already received relief from the UIF mechanisms. Applications for this relief are only available from 2 April and can be registered on http://www.smme.gov.za
This facility will offer loans at a rate of prime less 5% p.a. Loan abuse will result in paying prime plus 10% p.a.
The second type of relief is an SMME Business growth resilience facility aimed as businesses geared to take advantage of supply opportunities resulting from the COVID-19 pandemic or shortages of goods in the local market.
Essential goods include food, cleaning and hygiene products, medical products, fuel (including coal and gas) and basic goods which includes airtime and electricity.
Applications for the SMME growth relief can register on http://www.smmesa.gov.za from 2 April. This facility also offers loans at a rate of prime less 5% p.a. Loan abuse will result in paying prime plus 10% p.a. from1 April for 6 months.
3.2 Self Emp[loyed, Hawkers, SPAZA Shops
The assistance provides this category of business owner with a network of purchasing or bulk-buying opportunity as well as seed capital to enable traders to buy stock as well as a credit facility. Once funding granted, the business owner will be locked in for a period of at least one year.
The requirements are that the owner must be a South African citizen with a municipal permit and registered with SARS, CIPC and UIF. They will be required to have a bank account and will only be permitted to buy local goods. There will also be hygiene requirements
R3 billion is available for industrial funding to assist vulnerable firms by providing fast-track financing for companies providing essential goods or services, critical to the efforts to fight the virus and its economic impact. The following supplies and services are prioritised:
- Essential imported medical goods
(R500 million financing);
- Working capital, equipment and machinery
(R700 million available);
- Food security, and support for food supply chains;
- Energy security; and
- Working capital for component manufacturers.
Essential goods and services are defined as:
- Food: This is any food product including non-alcoholic beverages, animal food, chemicals, packaging and ancillary products used in the production of any food product;
- Cleaning and hygiene products: Toilet paper, sanitary pads, sanitary tampons, condoms, hand sanitiser, disinfectants, soap, household cleaning products, personal protective equipment, chemicals, packaging and ancillary products used in the production of any of the above.
- Medical supplies: Hygiene, medical products manufactured and critical services.
IDC have funding available for companies providing essential goods or services. For more information on the application process, email firstname.lastname@example.org
3.4 Tourism and Hospitality
The following categories can apply:
- Accommodation: Hotels, Resort properties and Bed and Breakfast (B&B's).
- Hospitality and Related Services: Restaurants (not attached to hotels), Conference Facility (not attached to hotels), Professional catering, and Attractions.
- Travel and Related Services: Tour operators, Travel agents, Tourist guides, Car rental companies, and Coach Operators.
Tourism and hospitality businesses that fall within the following criteria can apply for this relief:
- Has to be a company registered with CIPC.
- Turnover must not exceed R2.5 million per year.
- Holds a valid Tax Clearance Certificate.
- Employees are guaranteed employment for a minimum period of 3 months.
- Registered for UIF.
- Business already exists for at least one financial year as a tourism- specific establishment as outlined in the scope of application (suppliers and intermediaries are not eligible).
- Minimum wage compliance.
- C-19 has impacted the business.
- 12months' bank statements. balance sheet, income statements. cash flow statements must be provided.
- Indicate the intended use of the resources.
- The relief will be distributed in a spatially equitable manner to ensure that all provinces benefit.
- At least 70% of beneficiaries will be businesses that are black owned.
- At least 50 % of beneficiaries will be businesses that are women owned.
- At least 30% of beneficiaries will be businesses that are youth owned.
- At least 4% of beneficiaries will be businesses that are owned by people with disabilities.
The application for the relief from the department is a work in progress. as the department is expecting technical difficulties.
The Department will publish the application process on their website:
3.5 Solidarity Fund
This fund arose as a result of funding of R150 billion from Government, R1 billion from Mary Oppenheimer & daughters plus R500 million from Naspers.
It focuses on areas pertaining to the health care system, mobilising citizens and inspiring behaviour to flatten the curve and humanitarian aid specifically with regard to food, care and assisting SMMEs to sustain employees during the shutdown.
3.6 SA Future Trust (SAFT)
This arose from the R1 billion donation from the Oppenheimer family. It allows SMME’s to apply for interest free loans repayable within 5 years to assist in paying eligible employees’ salaries.
This is accessible to sole proprietors.
It applies to businesses with an annual turnover of less than R25 million and it must have been a sustainable business on 29 February 2020.
The application for this relief must be made via one of the four major banks. Nedbank appear to be the only bank so far to have released criteria for application.
The benefit will be R750 per qualifying employee per week over a 15-week period or R11 250 per permanent employee commencing3 April.
3.7 Rupert and Remgro Funds
These funds will be managed by Business Partners (R900 million) and PWC (R100 million), the latter which only applies to sole proprietors and the former to formalised SMEs.
Qualifying criteria are yet to be released.
Unlike most of the other relief measures, ownership of these entities does not have to be limited to South African citizens.
What is a non-negotiator is that the annual financial statements for 2019 are signed and submitted.
3.8 Other Funds
The Motsepe family have provided R1 billion which will be set aside for protective equipment and other resources.
Naspers have contributed R 1 billion for protective equipment assisting schools and other projects. Any disaster funds set up to relieve C-19 will be able to apply to SARS for PBO tax exemption as well as a Section 18A approval. This means that the donations made to such a fund will not be taxable and the donations made will be deductible for tax purposes.
Where an employee receives funding directly from a Disaster Fund on behalf of an SMME, the SMME will not be required to deduct PAYE on this funding as this is paid directly to the employee.
4. 4. Business to Business Relief
The majority of South African banks have announced relief measures for personal and business customers who are impacted by the C-19 outbreak and nationwide lockdown. The banking sector have put in place various relief measures including payment holidays reduced instalments and some others specific to the bank concerned.
Kindly contact your bank for more information.
Government is also trying to relieve the Retail Property Sector due to the possible negative effects of theC-19 pandemic by temporarily removing S4 and S5 of the Competitions Act, 89 of 1998.
The sole purpose to drop this regulation is to ensure the survival of tenants in the retail sector specifically the clothing, footwear and home textile retailers, personal care services, as well as restaurants.
Government is attempting to encourage large corporation landlords to cooperate with other similar landlords and form universal agreements to ease the burden on retail tenants. S4 and S5 speak of banning collusion and price-fixing which are temporarily not enforceable. Government wants Landlords to provide the following relief to Retail tenants:
- Payment holidays and/or rental discounts;
- Limitations on the eviction; or
- Suspension or adjustment to lease agreement clauses that restrict the designated retail tenants from undertaking reasonable measures required to protect viability during the national disaster.
The Taxhouse: +27 (0)87 802 7811