As part of the COVID-19: DISASTER MANAGEMENT TAX RELIEF The South African Government announced tax relief measures to alleviate the tax burden for employers and to minimize job losses to employees.
To effect these measures the Draft Disaster Management Tax Relief Bill & Draft Disaster Management Tax Relief Administration Bill was announced which included the following amendments:
To minimize job losses the tax incentive programme is expanded for a period of four months and extended to include employees who previously not eligible.
Increased the tax-deductible limit for donations made by employees to the Solidarity fund
To alleviate the financial burden for employers and Introduced a four-month holiday (non-payment) for the skills development levy contributions to assist businesses with their cash flow in the short-term
The Department of Labor introduced a Temporary Relief Scheme for employers and employees contributing to the UIF, to compensate affected employees by paying a portion of their salary for the reduced working hours
Enhanced ETI of maximum R 750 and include employees employed before 1 October 2013
ETI - Definition of “monthly remuneration” – effective 1 May 2020 has been changed to include more employees in eligibility criteria.
Covid-19 Disaster Relief organization
Exemption from SDL – 1 May 2020 to 31 August 2020
Deferral of employees’ tax – 35% for employers with turnover < R100 million
Solidarity Fund Donations - Additional 33.33% ( 3 months) or 16.67% (six months) for donations to the Solidarity Fund before 31 July 2020
Impact on Payroll
1.SAP Note 2928994
Additional Employer Tax incentive (Expansion) -
Employer Tax Incentive is a tax incentive given to the employers for hiring employees (youth) from age 18-29 who are paid above the national minimum wage. The employers could claim a maximum of 1000 R per employee who would be eligible based on their age and hired after 01.10.2013 (date on which incentive was introduced).
Employers can claim an additional tax incentive of up 750 Rands per employee. The eligibility criteria to claim the additional tax incentive were relaxed. Employees above age of 30 are also eligible for additional tax incentive.
In addition to this, employees who have joined the organization before 01.10.2013 can also be eligible for the tax incentive.
If an employee's salary and working hours is reduced due the COVID-19, the employee’s actual actually paid is used in the ETI calculation and not the projected amount. This means that employees who normally would not qualify are now qualifying based on the reduced hours and reduced salary.
2.SAP Note 2922014
Skills development levy holiday – Employers are exempt from paying the skills development levy for a period of 4 months. This will alleviate the employers cashflow during the COVID-19 crisis.
3.SAP Note 2919619
Solidarity fund Donations Exemptions - Employees can contributed to Solidarity fund and claim tax exemptions of up to 33.3% for a period of 3 months or 16.67% for a period of 6 months. This will encourage employees to donate to the fund and claim an exemption up to 1/3rd their monthly salary.
4.SAP Note 2919619
A new allowance COVID-19 Temporary Relief Scheme (IT) only applicable for the 2020/2021 YOA which includes any benefit received from a COVID-19 Temporary Employee/Employer Relief Scheme and paid to the employee. This allowance must be reported under SARS code 3724; the allowance does not constitute remuneration will taxed on assessment and not in the payroll.