Your COVID-19 Tax Benefits and Relief Measures Summary

Apr 6, 2020 | FYI's

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As a business owner, you must be concerned about how best to respond to the economic and social fall-out from the COVID-19 pandemic. The decisions you take now can and will have a lasting impact on your business’ sustainability.

We can assist you by:

We have summarised the various COVID-19 relief measures for you into the relevant categories and provided the links to the documents on our website for ease of reference. But please contact us for assistance as these change on a regular basis according to the Government and department’s updates:

Employment/Tax Benefits:

UIF

  • Illness benefits for employees who must be self-quarantined for 14 days or more
  • Reduced work time (short term shut down) – UIF benefit is equivalent to the difference between what the employer normally pays and the normal UIF benefits applicable
  • Application forms can be downloaded from the Department of Employment and Labour website: https://www.labour.gov.za

Temporary Employer/Employee Relief Scheme (TERS) https://www.mdacc.co.za/index.php/example-of-ters-information-required-ters-application/

  • Separate benefit scheme (separate from normal UIF benefits with its own set of forms and requirements)
  • Cannot claim for TERS and the other UIF benefits (i.e. illness and short-time)
  • For a closed business as a direct result of COVID-19  (no clarity if divisions closed or whole company but at this stage, this option does not seem to apply if the company doesn’t close entirely, but lays off only some of its employees)
  • All forms must be completed else application will be rejected
  • The company (rather than the employee) submits a claim for UIF and the company then pays over the money to employees
  • Claims are not dependent on an employee having any UIF credits and will be entitled to benefits irrespective of how long they have contributed.
  • An employer can top-up difference for an employee where short or the UIF will be prepared to “top up” any payment made by the employer (by prior arrangement with the UIF)
  • The benefit will be calculated in terms of the income replacement rate sliding scale of 38 % (for high earners) up to 60 % (for low earners) as provided in the Unemployment Insurance Act, subject to the maximum threshold which is currently R17,712.
  • Despite conflicting reports, our understanding is that the maximum benefit for a high earner would be 38 % of R17,712 per month, which amounts to about R6,730 per month.
  • Online process: Send a blank email to Covid19ters@labour.gov.za and you receive an automated response with the relevant forms and other requirements.
  • The company must enter into a written agreement with the UIF if it has 10 or more employees
  • The company must fulfil a number of administrative requirements, e.g. proof of payroll for the last three months.
  • The company must open a dedicated UIF bank account, or clear an existing account, so that COVID-19 benefits can be tracked when there is Bargaining Council involved.

Employment Tax Incentives (ETI’s)

  • Employees earning below R6 500 per month – 18-65 years old – must be employed by 1.3.2020 (i.e. no new employees)
  • Monthly = 1st year R1500, 2nd year R1000, outside contract/age limit = R500
  • Only for period 1.4.2020 – 31.7.2020. thereafter “back to normal”
  • Excess credits to be refunded monthly vs every 6 months via EMP501 system

EMP201 PAYE Concession

  • From 1.4.2020 onwards – only applies to PAYE itself and not SDL/UIF -> will only impact from 7.5.2020 payment
  • 2020/2021 turnover must be less than R50m (not historical) and SARS compliant
  • Property rental companies and investment companies would more than likely not qualify. If your entity derives more than 10% of its income from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer, it would not qualify for the relief measures
  • Payment of 20% PAYE can be short paid and delayed – will be due in 6 equal instalments 1.8.2020 – 28.2.2021 via EMP201 system
  • If intentionally under-state the EMP201, SARS will apply penalties and interest

Provisional Tax without interest and penalties

  • 2020/2021 turnover must be less than R50m (not historical) and SARS compliant
  • 1st period due from 1/4/2020 – 30/9/2020 – usually 50% payment required, now 15%
  • 2nd period due from 1/10/2020 – 31/3/2021 – usually balance (100%) required, now 65%
  • Top due as per normal to pay the balance of taxes (35%)

VAT

  • No VAT deferral – must pay VAT monthly/bi-monthly in terms of normal rules.
  • ITAC permit required for critical goods rebate from customs duty

Financial Institutions:

  • Review the terms of your credit insurance policies to determine whether you may be covered in respect of your monthly instalments as a result of income disruptions caused by the COVID 19 Virus and/ or the National Shut Down.
  • Review your income protection policy to determine whether you may be covered for loss of income as a result of income disruptions caused by the COVID 19 Virus and/ or the National Shut Down.

Government Financial Relief/Funding options: 

Small Enterprise Finance Agency (SEFA) Funding – accessed at http://www.sefa.org.za/

  • Restricted to the following sectors and managed by Industrial Development Corporation (IDC):
  • Retail, wholesale and tourism industry
  • Production industry
  • Agriculture industry
  • Construction industry
  • Mining industry

Debt Relief Finance Scheme for qualifying SME’s – key contact debtrelief@seda.org.za

  • Funding via the Department of Small Business Development – accessed at www.smmesa.gov.za
  • To qualify, businesses must meet the SMME criteria to apply for financial or non-financial assistance in order to meet employee, supplier and overhead obligations.
  • Business 100% South African owned
  • 70% of employees employed must be South African citizens
  • Priority will be given to women, youth, and people with disabilities
  • Business must be tax compliant
  • Company statutory Documents;
    FICA documents (e.g. municipal accounts);
    Certified ID copies of Directors;
    3 months of bank statements;
    Latest annual financial statements / Latest management accounts;
    Business profile;
    6 months cash flow projections (where applicable);
    Copy of lease agreement or proof of ownership if applying for rental relief;
    Employee details (bank details and UIF) for help paying salaries

Business Growth/Resilience Facilities for qualifying Small, Medium and Micro Enterprises (“SMME’s”) – key contact growthfund@seda.org.za

  • The Business Growth and Resilience Facility seeks to help manufacturing SMEs, with a focus on those that can provide high-demand products during the outbreak
  • The fund will provide working capital, bridging finance, equipment finance, and order finance
  • Eligibility criteria:
    • 100% SA owned
    • Employ at least 70% South African staff
    • SARS compliant – if SMEs are not registered and tax compliant, the department will help business owners with that process.
    • Priority will be given to women, youth, and people with disabilities.
  • Supporting document to attach to your applications:
  • CIPC registration documents;
    FICA documents (e.g. municipal accounts);
    ID Copies of directors/ members;
    3 months of bank statements;
    Latest annual financial statements /management accounts;
    Business profile;
    6 months cash flow projections (where applicable);
    Industry certification (where applicable);
    Estimations for funding requested

South African Future Trust (SAFT)
https://www.mdacc.co.za/index.php/the-oppenheimers-r1-billion-donation-how-businesses-workers-can-get-a-slice-of-the-money/

  • SAFT will transfer funds directly to employees of participating SMMEs, via a 5-year interest-free loan and employees themselves have no liability for repayment
  • SAFT makes available R1bn in loan funding for SMME employees that meet pre-defined eligibility criteria and conditions.
  • Loans will be extended to eligible SMMEs on a first-come-first-served basis
    https://opp-gen.com/saft/#eligibility

    • Annual turnover of less than R25m
    • Trading for a minimum of 24 months
    • Must be an ABSA, FNB, Nedbank or Standard Bank client
  • Eligible SMME employers apply for the scheme via their preferred partner bank and provide a list of names of employees “at-risk” due to COVID-19. The SMME must be an existing client of the partner bank in order to apply
  • SMMEs submit any supporting documentation on behalf of their staff as required
  • Qualifying employees receive funds directly from the partner bank
  • The company pays back the principal loan to SAFT within 5 years interest-free
  • Beyond the immediate crisis, SAFT will have an ongoing role in accelerating economic growth. Any further funds donated, and any loans repaid by participating SMMEs, to SAFT will remain within this non-profit structure. They will be used to support initiatives with a focus on employment creation, until all funds are ultimately disbursed.

COVID-19 SME fund (Rupert Foundation/Remgro) https://www.smmesa.gov.za/

  • This fund will provide loans for SME’s to buy raw material, pay salaries, and cover operational costs
  • Includes Sole Proprietors and Partnerships
  • Eligibility criteria:
    • Can include foreign ownership
    • February 2019 signed AFS (not negotiable)
    • A fully compliant registered entity
    • Excludes direct agriculture, NPO’s
  • Cost of finance year 1 = 0% interest and payment holiday; months 12- 60 = prime interest rate

Government Grants and Loan Funding available:

Agro-processing Support Scheme (DTIC)

  • Maximum funding R20m per entity
  • 20% – 30% grant on capital costs
  • Eligibility criteria:
    • A fully compliant registered entity
    • Involved in starting new Agro-processing operation or in expanding/upgrading an existing Agro-processing operation
    • Minimum level 4 BEE certificate
    • Purchase 30% of supplies from black-owned farmers

Black Industrialist Scheme (DTIC)

  • Cost-sharing incentive
  • Maximum funding R50m per entity
  • 30% – 50% grant on capital costs (not acquisitions)
  • Eligibility criteria:
    • A fully compliant registered entity
    • More than 50% black-owned and managed
    • Aligned to productive identified sectors

MCEP loan for COVID essential product manufacturers administered by IDC

  • Working capital and plant and equipment requirements
  • Maximum funding R30m per entity
  • Finance cost 2.5% per annum for 48 months
  • Eligibility criteria:
    • A fully compliant registered entity
    • Minimum level 4 BEE certificate
    • Must have valid contract/purchase order or letter of intent

COVID-19 fund primarily for manufacturers including imports; short term finance administered by IDC

  • Short term loan for once-off contract finance or import funding, revolving credit and guarantees for imports
  • Finance cost prime + 1% per annum for 3 months
  • Eligibility criteria:
    • Fully compliant registered entity operational for at least 1 year
    • Must be registered as a vendor with Government, Multinationals or retailers
    • Minimum level 4 BEE certificate
    • Must have valid contract/purchase order or letter of intent
    • Proven track record in manufacture or supply

Tourism fund administered by the Department of Tourism

  • Eligibility criteria:
    • Fully compliant registered entity operational for at least 1 year
    • Turnover less than R2.5m
    • Black-owned entity
    • Guarantee of employment of staff for at least 3 months

NEF Loan administered by National Empowerment Fund

  • Black businesses to purchase machinery and raw materials to be used in the supply of COVID related products
  • Loans of R500,000 to R10m
  • Finance cost 0% interest in year 1 and fixed at 2.5% per annum thereafter
  • Eligibility criteria:
    • Tax compliance
    • Produce hand sanitisers, disinfectants, soaps, masks, gloves, medical protective clothing, maize meal, flour, beans, cooking oil
    • Must be registered supplier for retailers or institutions that have agreed to purchase the manufactured products

For further details of all COVID-19 information,
please see our dedicated website page on
https://www.mdacc.co.za/index.php/covid-19/

As a firm, our priority in respect of all our Clients, Employees and Associates, is that you all stay safe and healthy during these difficult times.

The partners and associates at MD are trained, experienced and are able to assist you in formulating plans to survive and ultimately thrive in times of crisis – please contact us to assist you with these measures.