Q & A’S FOR EMPLOYERS ON COVID-19 TAX RELIEF

Question & Answer

Q: What is the COVID-19 Tax Relief available to Employers?
A: On 21st April 2020 President Ramaphosa announced additional measures to assist employers to provide financial stability to their employees. One of these measures includes a 35% deferral on the monthly PAYE liability owed to SARS for the months of April, May, June and July. In addition, SARS will not impose any penalty or interest on the deferred PAYE liability amount. This means that employers are still liable to pay the remaining 65% as per normal.

Employers making use of this tax relief must pay back the total deferred PAYE liability amount in six equal instalments. These instalments must be paid as follows:

August 2020 – payment due by 7 September 2020;
September 2020 – payment due by 7 October 2020;
October 2020 – payment is due by 6 November 2020 (last business day before the 7th);
November 2020 – payment is due by 7 December 2020;
December 2020 – payment is due by 7 January 2021;
January 2021 – payment is due by 5 February 2021;

If an Employer defaults on the payment of the instalment, penalty and interest will be imposed for the month defaulted.

In addition, the president also announced a payment holiday for SDL payments for the tax periods of May to August. This means that from the May 2020 tax period, which is due on or before 7 June, employers registered for SDL, do not have to declare any SDL liability on the EMP201 returns and make payment for the period.

Q: Which employers qualify for the COVID-19 Tax Relief for PAYE?
A: To qualify for the COVID-19 Tax Relief for PAYE, employers, must:

Be either an:
- individual;
- partnership;
- trust; or
- company/Close Corporation/Shareblock/Co-operative;
  that conducts trade.
have a gross income of R100 million or less during the year of assessment ending on or after 1 April 2020, but before 1 April 2021; AND
- that gross income must not include more than 20% in aggregate of interest, local & foreign dividends, royalties, rental form letting of fixed property and any remuneration received from an employer;
  - if the rental of fixed property is the primary trading activity and the rental income is substantially the whole of the gross income (at least 90%), disregard this exclusion test; and
  - for purposes of a partnership, use the aggregate partner’s gross income from the partnership; or
- is a qualifying micro business who meet the requirements set out in the Sixth Schedule.
  Note: For further details, please refer to the guide on the Turnover Tax webpage.
Be fully tax compliant, meaning:
- Is registered for all required taxes;
- Have no outstanding returns for any taxes registered for;
- Have no outstanding debt for any taxes registered for;
- Be registered for PAYE as at 25 March 2020.

Q: What does it mean to be tax compliant?
A: Tax compliance means that you:

Are registered for all required taxes;
Have no outstanding returns for any taxes you are registered for;
Have no outstanding debt for any taxes you are registered for, excluding
- Instalment payment arrangement;
- Compromise of tax debt;
- Payment of tax pending objection or appeal
- Tax debt of R100 or less or any other amount the Commissioner of SARS may determine.

Q: How can I check if I am tax compliant?
A:To determine if you are tax compliant, you can:

Request the latest Statement of Account for the taxes you are registered for to confirm if you have any outstanding returns or debt;
View your MCP page on eFiling;
Call the SARS Contact Centre to request your compliance status.

Q: For which periods can I claim the COVID-19 Tax Relief for PAYE?
A: The COVID-19 Tax Relief for PAYE is available for the four-month period from 1 April 2020 to 31 July 2020. The first deferment can be claimed in your April 2020 EMP201 return.

Q: What is the COVID-19 Tax Relief for PAYE?
A: The COVID-19 Tax Relief for PAYE is the payment of 65% of the total PAYE liability and deferral of 35% of the total PAYE liability.

Note: The 35% deferral is only applicable on the PAYE liability declared on the original EMP201 return submitted to SARS. Any increase in the PAYE liability through a subsequent request for correction will not be taken in consideration when the 35% deferral is calculated.

Q: How do I claim the COVID-19 Tax Relief for PAYE?
A: You can claim the COVID-19 Tax Relief for PAYE on the EMP201 return that you submit monthly. To claim the COVID-19 Tax Relief for PAYE, you must do the following steps:

Complete the EMP201 as per normal with the full PAYE Liability
Note: The form will calculate the PAYE payable at 100%. You cannot change this value;
Determine the actual amount payable to SARS as follows:
- Submit the EMP201 to SARS. SARS will issue a statement of account, which will reflect the COVID-19 Tax Relief (deferred amount) for PAYE and the total amount payable for that respective period, to you;
  OR
- Calculate the Total Payable as (65% of the PAYE Liability) plus SDL Payable plus UIF Payable; Note: If you make a late payment, you will forfeit the benefit of the COVID-19 Tax Relief for PAYE and SARS will impose penalty and interest on the calculated Total Payable.

Note: Check your statement of account 48 hours after submitting the EMP201 to ensure SARS has not revoked the discount due to non-compliance.

Please note that no amounts reflecting or indicating the COVID-19 Tax Relief for PAYE will be displayed on the EMP201 form. You have to view your statement of account to see the effect on your account.

Example:

PAYE Liability	35% Tax Relief	PAYE payable	UIF Liability	Total Payable amount
5 000	1 750	3 250	100	3 350
20 000	7 000	13 000	400	13 400
54 000	18 900	35 100	1 080	36 180

Q: Can I claim the COVID-19 Tax Relief for PAYE if I claim ETI?
A: Yes, all qualifying employers can claim the COVID-19 Tax Relief for PAYE regardless of whether they claim ETI or not.

If you claim ETI, you must do the following steps:

Capture the full PAYE Liability
Note: The form will calculate the PAYE payable at 100%. You cannot change this value;
Capture the ETI Calculated;
Calculate 65% of the PAYE Liability;
Limit the ETI Utilised to the lesser of ETI Calculated or 65% of the PAYE Liability;
Calculate the Total Payable as (65% of the PAYE Liability) less ETI Utilised plus SDL Payable plus UIF Payable; Note: If you make a late payment, you will forfeit the benefit of the COVID-19 Tax Relief for PAYE and SARS will impose penalty and interest on the calculated Total Payable
Note: Check your statement of account 48 hours after submitting the EMP201 to ensure SARS has not revoked the discount due to non-compliance.

Example:

Q: Am I obliged to make use of the COVID-19 Tax Relief for PAYE?
A: The COVID-19 Tax Relief is an option made available to Employers who requires assistance to provide financial stability to their employees during the COVID-19 lockdown period. Should you decide not to make use of this option, you must complete your EMP201 as per normal and make the full payment to SARS by the due date. If you make a late payment, SARS will impose a penalty and interest on the full amount due.

Q: How will I know how much to pay back for the deferred PAYE?
A: After the 7th of August, SARS will determine the six equal payments for total amount that you have deferred and include it in the monthly Statement of Account, which you can request from the 15th of August .

Q: When must I pay back the deferred PAYE?
A: The instalments must be paid as follows:

August 2020 – payment due by 7 September 2020;
September 2020 – payment due by 7 October 2020;
October 2020 – payment is due by 6 November 2020 (last business day before the 7th);
November 2020 – payment is due by 7 December 2020;
December 2020 – payment is due by 7 January 2021;
January 2021 – payment is due by 5 February 2021.

If you default (short payment or no payment) on the payment of the instalment, penalty and interest will be imposed for the month defaulted.

Q: What is the SDL Payment Holiday?
A: From the month of May 2020, which is due on or before 7 June, employers registered for SDL do not have to declare and pay SDL to SARS.
This payment holiday is applicable for the four month period beginning from 1 May 2020 to 31 August 2020

Q: How do I qualify for the SDL Payment Holiday?
A: All employers who are registered for SDL automatically qualify for the SDL Payment Holiday.

Q: How do I claim the SDL Payment Holiday?
A: The SDL payment holiday will be automatically provided. The zero amount SDL Liability will be defaulted on the EMP201 return for the four month period from May to August 2020. In other words, the SDL exemption is effective from the tax periods from May 2020 to August 2020 (4 months). The first exemption is applicable to the EMP201 return for May 2020, which is due to SARS by 7th June. The tax period April 2020, for which the return and payment is due 7 May 2020, the existing rules applies – SDL must be calculated, declared on the EMP201 and paid by the employer.

Q: What is the COVID-19 Tax Relief for ETI?
A: On 23rd March 2020 President Ramaphosa announced measures to assist employers to provide financial stability to their employees who earn not more than R6500 per month. These measures include an extension of employees who qualifies for ETI, an additional amount up to R750, and the monthly refund payment of any excess ETI claimed.

Q: Which employers qualify for the COVID-19 Tax Relief for ETI?
A: If you are an ETI qualifying employer and you are fully tax compliant, you qualify for the COVID-19 Tax Relief for ETI. To determine if you are an ETI qualifying employer, visit the ETI webpage.

Q: What does it mean to be tax compliant?
A: Tax compliance means that you:

Are registered for all taxes;
Have no outstanding returns for any taxes you are registered for;
Have no outstanding debt for any taxes you are registered for, excluding:
- Instalment payment arrangement;
- Compromise of tax debt;
- Payment of tax pending objection or appeal
- Tax debt of R100 or less or any other amount the Commissioner of SARS may determine.

Q: How can I check if I am tax compliant?
A: To determine if you are tax compliant, you can:

Request the latest Statement of Account for the taxes you are registered for to confirm if you have any outstanding returns or debt;
View your MCP page on eFiling;
Call the SARS Contact Centre to request your tax compliance status.

Q: For which periods can I claim the additional ETI?
A: The COVID-19 Tax Relief for ETI is available for the four month period from April 2020 to July 2020. The first extended ETI can be claimed in your EMP201 for April 2020.

Q: How much additional ETI can I claim?
A: An additional amount up to R750 can be claimed for each qualifying employee.

Q: For which employees can I claim additional ETI?

A: You may claim for:

Employees who are currently eligible for ETI;
Employees for whom you have exhausted ETI claims according to the existing rules of the 24 month qualifying cycle, provided the employee is between the age of 18 and 29 (inclusive) and is still in you employ;
Employees who are between the age of 30 and 65 (inclusive), provided they meet the salary bands and other qualifying criteria.

Q: How do I calculate additional ETI:
A: Additional ETI is calculated as follows:

Employees who are in the first qualifying cycle for ETI:

Monthly Remuneration	Determination	Monthly Calculated ETI Amount
R0 – R1999	(50% x monthly remuneration) + R750	R750 – R1749.50
R2000 – R4499	Fixed at R1750	R1750
R4500 – R6499	Formula: X = A – (B x (C – D)) X = monthly calculated amount A = R1750 B = 0,875 C = Monthly Remuneration D = R4500	R 1750 – 0.875
R6500 and more	Nil	R0.00

Employees who are in the second qualifying cycle for ETI:

Monthly Remuneration	Determination	Monthly Calculated ETI Amount
R0 – R1999	(25% x monthly remuneration) + R750	R 750 – R1249.75
R2000 – R4499	Fixed at R 1250	R1250
R4500 – R6499	Formula: X = A – (B x (C – D)) X = monthly calculated amount A = R1250 B = 0,625 C = Monthly Remuneration D = R4500	R1250 – 0.625
R6500 and more	Nil	R0.00

Employees for who you have exhausted ETI claims according to the existing rules of a 24 month qualifying cycle, provided the employee is between the age of 18 and 29 (inclusive) and is still in your employ, and;
Employees who are between the age of 30 and 65 (inclusive), provided they meet the salary bands and other qualifying criteria, you can claim:

Monthly Remuneration	Determination	Monthly Calculated ETI Amount
R0 – R4499	Fixed at R 750	R 750
R4500 – R6499	Formula: X = A – (B x (C – D)) X = monthly calculated amount A = R750 B = 0,375 C = Monthly Remuneration D = R4500	R750 – 0.375
R6500 and more	Nil	R0.00

Example: Employer has three employees. The employer claims ETI for employee A, the employer exhausted ETI claims for 27-year old employee B two years ago, and Employee C is 34 years old. The employees each earn R4 500 per month. The Employer will be able to retain R3 250 per month.

Q: How do I claim additional ETI?
A: Additional ETI must be claimed on the monthly EMP201 as follows:

Calculate ETI as per the updated rules (see FAQ “How do I calculate additional ETI);
Capture the sum of ETI calculated for all qualifying employees on the EMP201.

Example:

Employer has three employees. The employer claims ETI for employee A, the employer exhausted ETI claims for 27-year old employee B two years ago, and Employee C is 34 years old. The employees each earn R4 500 per month. The Employer will be able to retain R3 250 per month. This amount must be captured in the ETI calculated field on the EMP201.

Q: How will I qualify for an ETI Refund?
A: ETI can only be offset against the PAYE payable to a maximum of either the PAYE Liability or the ETI calculated for the month. If the PAYE liability is less than the ETI calculated, the excess (ETI carried forward) will be paid as a refund, provided that you are fully tax compliant. ETI can only be offset against the PAYE payable to a maximum of either the PAYE Liability or the ETI calculated for the month. If the PAYE liability is less than the ETI calculated, the excess (ETI carried forward) will be paid as a refund, provided that you are fully tax compliant.

Example:

* Only SDL and UIF payable because the PAYE liability is set of against the ETI incentive.

Q: When will my ETI refund be paid?
A: During the COVID-19 tax relief, the ETI refund will paid within 10 days after your EMP201 has been successfully processed, provided that you are fully tax compliant, you have not been selected for an audit and SARS has valid bank details for you.

Note: If you are non-compliant for a month, the ETI credit will be carried forward to the next month. However, this credit will be only paid to you at the end of the reconciliation period even if you have resolved your tax compliance status.

Q: Must the additional ETI be included in the IRP5/IT3(a) certificate?
A: All additional ETI must be included on the IRP5 certificates. An additional qualifying cycle option must be used for employees who are not normally eligible for ETI either due to the age restriction, or because you have already claimed ETI for the allowable 24 months. For employees who are normally eligible for ETI, use the current options.

Example:

Q: Should I include payments received from UIF TERS as remuneration when I calculate ETI?
A: Payments from UIF TERS directly to the employer, who will in return pay the employees are exempt and does not form part of remuneration. These payments must be excluded for purposes of ETI determination.
Example: Employee earns R5000, but due to the impact of the COVID-19 disaster the employer only pays R2000 and UIF TERS pays R3000. For ETI purposes, the remuneration is only R2000
This is supported by the following extracts from the Income Tax Act:

Payments received from the UIF are exempt in terms of s10(1)(mB) of the Income Tax Act;
The definition of ‘remuneration’ means any amount of income (para 1 of Fourth Schedule); and
The definition of ‘income’ means the amount remaining of the gross income after deducting any exempt amounts (section 1(1) of the Income Tax Act).

Q: Are payments received from COVID-19 disaster relief organisations remuneration?
A: When the employer successfully applies for disaster relief from a COVID-19 fund, there is a loan agreement between the employer and the fund.
Where the financial aid provided to the employer is specifically for the payment of salaries/wages, the employer must provide complete details for each affected employee and the fund will directly pay the employees the relevant salary or wage. This is to ensure that the employer does not use the payments for other purposes.
These payments retain the identity of remuneration as the fund is merely paying the employee’s remuneration on behalf of the employer.

Q: How does payments received from COVID-19 disaster relief organisations affect PAYE deductions?
A: Payments received from COVID-19 disaster relief organisation are exempt from PAYE, but is subject to normal tax (if above tax threshold) on assessment when the employee submits his/her income tax return (ITR12).
Therefore, the portion the employee received, must be declared on the IRP5/IT3(a) certificate as a COVID-19 Sec18A Disaster Relief Fund payment/ allowance (source code 3724)

Q: Should I include payments received from COVID-19 disaster relief organisations when I calculate ETI?
A: Yes, payments received from COVID-19 disaster relief organisations payments retain the identity of remuneration as the fund is merely paying the employee’s remuneration on behalf of the employer.
Example: Employee earns R5000, but due to the impact of the COVID-19 disaster the employer only pays R2000 and fund pays R3000. For ETI purposes, the remuneration is R5000.

Q: I have submitted my EMP201, but made a late payment for the 65% PAYE. Why is the penalties on the full PAYE amount?
A: If you make a late payment, you will forfeit the benefit of the COVID-19 tax relief for PAYE and therefore, SARS has imposed penalty and interest on the full amount.
You can apply for deferment and/or the waiving of the penalty. For the process to follow, click here.

Q: I have submitted my EMP201 and made the 65% PAYE payment, but the 35% relief does not show on my statement of account
A: If the 35% relief does not show on your statement of account, there are some of the qualifying criteria which has not been met.
You must ensure that you meet all qualifying criteria, including making the current payment on time before submitting the EMP201 return.
Should you not meet all the qualifying criteria, you can apply for the deferment. For the process to follow, click here.

Q: Due to the lockdown, my employer and I have agreed to reduce my salary for the next 6 months. What are the tax implications?
A: Provided that the employee has unconditionally forfeited a portion of his or her salary (and not merely postponed the right to receive it until a later date) then only the reduced salary will be remuneration subject to the deduction of employees’ tax. The forfeited salary does not accrue to the employee and is not subject to taxation. UIF and most likely also retirement fund contributions will have to be calculated on the reduced salary.

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