Tax relief, other relief packages announced for SMEs

Several relief packages for small businesses, including tax relief, have been announced since the country has gone into lockdown in an effort to curb the spread of COVID-19.

However, there is frustration and uncertainty around the difficulties in finding these programmes, accessing their webpages, or how each one works and how to apply, says Spartan SME Finance CEO Kumaran Padayachee.

“As with any crisis, timing is always critical and many of these programmes are understandably still being operationalized,” he adds.

“The financial relief announcements have been somewhat of a healing balm to the ears of entrepreneurs”. The swift reactions and proactivity of the government and the private sector in putting these lifelines in place is highly commended, says Padayachee.

National Treasury over the weekend announced  tax relief measures for tax compliant businesses with an annual turnover of less than R50m.

The relief covers employees’ tax (PAYE), provisional tax payments and the employment tax incentive.

Joon Chong, tax partner at Webber Wentzel, says there has been no relief outlined in terms of late payments of Value Added Tax (VAT). She notes that VAT vendors who have monthly payment obligations has a payment due on 7 April.

“There is no indication that there will be any relief (for late payments). This means that VAT vendors should only delay their VAT payments as a last resort to avoid the automatic 10% late payment penalty when payments are made after their due dates,” she warns.

Small businesses will be able to defer payment of 20% of their employees’ tax from 1 April to 31 July this year, without penalties and interest.

Chong says the 20% deferral will be payable in equal instalments over six months from August this year. “The first payment instalment must be made on 7 September.”

Qualifying small businesses will also be able to defer their first and second provisional tax payments.

Only 15% of the estimated tax liability for the year of assessment is payable for the first provisional tax payment – instead of 50%. With the second provisional payment 50% should be paid. The remainder of the estimated tax liability should be paid by the third top up date to avoid interest.

According to Chong there is still no relief measures in place for sole proprietor businesses. She says one possibility is that they could be eligible for similar relief if their turnover is less than R5m and less than 10% of their income is from interest, dividends, or rental and remuneration.

Employers will also be able to find relief in terms of the employment tax incentive. This include an additional R500 per qualifying employee; R500 for each qualifying employee – aged between 18 and 29 years – where the employer had previously claimed from the incentive for the full 24 months; and R500 for each employee between 30 and 65 years who does not qualify for the incentive because of their age.

The reimbursements will be processed monthly as opposed to twice a year.

Chong says no tax relief was offered to companies with turnover of more than R50m.

However, she says the Tax Administration Act (TAA) provides for the remittance of penalties in exceptional circumstances.

SARS must remit the penalty, or a portion thereof, if it is satisfied that the taxpayer was “incapable” of complying with the obligations under the relevant tax acts.

One of the circumstances that may render a taxpayer incapable of complying with his tax obligations is a natural or human-made disaster. A civil disturbance, or disruption in services may also render a person “incapable of complying with his tax obligations as set out in the relevant act”.

Chong also notes that the TAA provides for the remittance of penalties in a case of serious financial hardship where there is an “immediate danger” that the continuity of business operations and the continued employment of its employees are jeopardised.

Keith Engel, CEO of the South African Institute of Tax Professionals, says tax practitioners need to inform their clients of the available COVID-19 relief mechanisms.

“These relief mechanisms not only include assistance on the tax side, but also subsidies from other departments, such as the Department of Labour and Small Business.”  He adds that thorough paperwork will be essential for prompt access to the relief.

Spartan SME Finance has created a COVID-19 relief registry. Relief initiatives typically go through the phases of announcement, followed by development, and then they put the operations in motion, says Padayachee.

“This includes processing applications which is at the heart of what small business owners want to know right now,” he says.