South Africa

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Return to homepage  |  Last updated: 14 October, 2020

The South African government has introduced unprecedented measures to assist South Africa in its fight against COVID-19; including a nationwide lockdown effective from midnight on Thursday 26th March 2020. The lockdown was partially eased from 1 May 2020, eased further from 1 June 2020 and 18 August 2020 and eased again with effect from 21 September 2020. In terms of the revised lockdown regulations most economic activity and movement of people is permitted subject to conditions. International travel is permitted from 1 October 2020. Leisure travel from high risk countries is however prohibited. On 24 June 2020, the Disaster Management Tax Relief Bill, 2020 and Disaster Management Tax Relief Administration Bill, 2020 were tabled in parliament. These bills provide for tax measures in order to assist with alleviating cash flow burdens on tax compliant small to medium sized businesses arising as a result of the COVID-19 pandemic and lockdown and to provide for matters connected therewith. Tax relief measures introduced include a delay of remittances of the “Pay As Your Earn” (PAYE), without triggering penalties or interest, a delay in the remittances of provisional payments of income tax, without triggering penalties or interest and an acceleration of certain employment tax incentives.

• On 18 March, the government announced works on a package to support Small and Medium Enterprises (SMEs). The Debt Relief Fund aims to provide relief on existing debts and repayments, to assist SMEs during the COVID-19 outbreak. For SMEs to be eligible for assistance under the Debt Relief Fund, the applicant must demonstrate a direct link between the impact or potential impact of COVID-19 on the business operations. The Ministry has set up a centralized registration system (www.smmesa.gov.za) where all those in need of financial aid will register and be screened.
• The Business Growth or Resilience Facility seeks to enable continued participation by SMEs in supply value-chains, in particular those who manufacture (locally) or supply various products that are in demand due to current shortages arising from COVID-19. This facility will offer working capital, stock, bridging finance, order finance and equipment finance and the amount required will be based on the funding needs of the business.
• From 20 March, the Reserve Bank cut the repo rate by 100 basis points from 6.25% to 5.25%. The repo rate was reduced by a further 100 basis points to 4.25% from 15 April 2020. The repo rate was reduced by a further 50 basis points from 22 May 2020 to 3.75% and by 25 basis points on 24 July 2020 to 3.50%.
  

The ETI is an incentive aimed at reducing youth unemployment by encouraging employers to hire young work seekers. Employers are incentivized to employ young persons (between 18-29 years of age) employed on or after 1 October 2013 in terms of a cost-sharing arrangement with the government, by allowing the employer to reduce  the amount of PAYE it is required to pay to SARS by the amount of the ETI. This provides an immediate cash benefit to the employer.

The Disaster Management Tax Relief Administration Bill makes provision for the extension of ETI benefits. Save as otherwise indicated, the amendments are deemed to have come into operation on 1 April 2020 and will apply to any remuneration paid on or before 31 July 2020. In terms of the proposals:

• The definition of a “qualifying employee” has been temporarily amended. The requirement that the qualifying. The relaxation of this requirement will allow not only employees between 30 and 65 years of age but also employees who were employed prior to 1 October 2013 to qualify for the ETI.
• The definition of “monthly remuneration” has been temporarily amended to mean the amount paid or payable to the qualifying employee by the employer in respect of the month. The reference to the number of hours required to be worked by the employee (i.e. 160 hours per month) has been removed. The gross-up of remuneration where the employee worked for less than 160 hours per month will not be required. The amount of the ETI that can be claimed must however be apportioned where the employee works less than 160 hours. This amendment is only effective from 1 May 2020 to 31 July 2020.
• The minimum wage of R2 000 per month available in section 4 of the Employment Tax Incentive Act is no longer in place for categories of workers or companies that:
  • may be exempt from the national minimum wage, or
  • where section 3 of the National Minimum Wage Act does not apply, or
  • where the wage regulating measure does not apply.
    
• The gross up of remuneration for purposes of compliance with the wage regulating measure is also not required where the employee is employed and paid remuneration for less than 160 hours per month.
• The incentive has been increased from up to R500 to up to R750 per “qualifying employee” per month for the period 1 April 2020 to 31 July 2020.
• The amount that can be claimed per “qualifying employee” is set out in the accompanying tables:
  

• Where the employer claimed the ETI for the first 24 months in respect of the above mentioned qualifying employee or the employer employs a qualifying employee between 30 and 65 years of age, the amount of the ETI will be calculated as follows:

• In addition to the above, section 10 of the ETI Act has been clarified to indicate that a reimbursement must be claimed from SARS at the end of each month where the ETI available to an employer exceeds the employees’ tax liability. SARS will therefore accelerate the payment of ETI reimbursements from twice a year to monthly to facilitate the availability of cash into the hands of compliant employers as soon as possible. SARS will have to ensure that its systems are updated to allow for a monthly reimbursement.

COVID19 Temporary Employee/Employer Relief Scheme

Contributions to the Unemployment Insurance Fund (UIF) are required to be withheld by employers in relation to a monthly remuneration value capped to ZAR 14 872.1% of the UIF contribution is withheld from the employee’s compensation and the employer makes a matching 1% contribution.

A new Directive, the COVID19 Temporary Employee/Employer Relief Scheme (C19 TERS), was issued by the Minister of the Department of Employment and Labor in Government Gazette 43161, dated 25 March 2020. This directive was subsequently revised as set out in Government Gazette 43216 dated 8 April 2020. The benefit was extended for certain categories of employees for a further six week period in terms of Government Gazette 43611 dated 13 August 2020. On 7 September 2020 a further extension was granted under Government Gazette 43693 for the duration of the State of Disaster.

The Directives create a special benefit under the UIF for employees who have lost all (or part of) their income as a result of the national disaster, thereby minimizing the economic impact of the loss of income due to the COVID-19 pandemic.

• Should an employer as a direct result of COVID -19 pandemic close all or part its operations for a 3 (three) months or lesser period, the company may qualify for a C-19 TERS Benefit.
• Employees who suffer or will suffer a loss of income as a result of the temporary closure by the employer of its business operations and who were in employment prior to the commencement of the national lock-down on 27 March 2020 are eligible to receive the C19-TERS benefits. An employee may only receive a C19-TERS in terms of the directives if the total of the benefit together with any additional payment by the employer in any period is not more than the remuneration that the employee would ordinarily have received for working during that period. If the employer’s employees, during the period of lockdown, receive a C19-TERS benefit from a bargaining council, that employer may not submit an application. i.e. the employee may not secure a C-19 TERS benefit from the bargaining council and the employer.
• As C19 TERS is a temporary relief measure, the benefit is de-linked from the UIF’s normal benefits. Therefore, the normal rule that, for every four days worked, the employee accumulates a one day credit, to a maximum credit of 365 for every four years, will not apply. In addition, the benefit will only pay for the salary cost of the employees during the temporary closure of the business operations. Employees who are being paid in full by their employers during this period, are not eligible for these benefits.
• The maximum Unemployment Insurance (UI) benefit will be paid as per the benefit structure in section 12(1)b of the Unemployment Insurance Fund Act  (UIF Act), if the employer is unable to pay its employees during the lockdown period. However, if an employer partially pays its employees, the UI benefit will be reduced accordingly.
  
• The employer must inform the UIF immediately on the recommencement of its business operations that were subject to temporary closure. The employer must return any unutilised funds, including interest, to the UIF within 10 days of the recommencement of its business operations, or the termination of Memorandum of Agreement concluded by any bargaining council, whichever is the earlier.
• The Directives provides for the following instances in which access to the short-term UIF benefits will apply:
  • Loss of income due to short term shut down
    
    This will be applicable in circumstances where an employee loses income (wholly or partially), despite being still employed, due to the temporary closure of all or part of the company’s operations as a result of the lockdown.
    
    The salary to be considered when calculating the benefits will be capped at a maximum amount of R17,712.00 per month, per employee and an employee will be paid in terms of the income replacement rate sliding scale (38%-60%) as provided in the UIF Act.  Moreover, should an employee's income determined in terms of the income replacement (IRR) sliding scale fall below R3500 per month, the employee will be paid a replacement income equal to that amount.
    
    
  • Illness benefit
    
    Employees will qualify for this benefit where the employee is in quarantine for 14 days due to the COVID-19 pandemic. Confirmation letters from both the employer and employee that the employee was in an agreed pre-cautionary self quarantine for 14 days, must be submitted together with the application. A medical certificate is not required in relation to the self-quarantine period.
    
    In special circumstances, should an employee be quarantined for longer than 14 days, a medical certificate from a medical practitioner is also required to be submitted.
    
    
  • Death benefit
    
    This benefit will be applicable where the contributor passes on due to the corona virus, in terms of Part F of the UIF Act, as amended. The surviving spouse, life partner, children of the deceased or the nominated persons (in that order) are eligible to apply for this benefit. The benefits are then paid to the beneficiaries of the deceased, in terms of the prescribed benefits structure per section 12(3)b of the UIF Act.

• Expedited procedure for temporary registration to use ethyl alcohol to manufacture disinfectant.

Export

• Export controls on certain products, including face masks, hand sanitizers, certain chemical compounds and certain medicaments. Export permit required.

Duty relief

• Rebate of customs duty and exemption of import VAT on essential goods for which an ITAC permit had been issued - Rebate Item 412.11 to the Act.

• On 1 June, South Africa move from Level 4 of lockdown to Level 3.The country moved to level 2 on 18 August 2020 and to Level 1 on 21 September 2020.  It’s part of a tiered system introduced by President Cyril Ramaphosa. There are five stages in total. Most businesses have resumed operations although restrictions limit these activities for some. Restrictions on movement have largely been lifted. International leisure travel from certain high risk countries remains restricted. International air travel from all countries is permitted for business purposes, subject to compliance with regulations. The full policy is available on the gov.za page.

• The Disaster Management Tax Relief Bill released on 24 June 2020.
• The Disaster Management Tax Relief Administration Bill released on 24 June 2020.
• Note 4(d) to Section D of Part 1 of Schedule No 6 to the Customs and Excise Act, No.91 of 1964 ("the Act")
• Government Notice No R424 of 27 March 2020
• SARS Media Release 27 March 2020 (Reference to Regulation No R398 IN Government Gazette 43148.
• Government Gazette 43161, dated 25 March 2020 read with Government Gazette 43216 dated 8 April 2020. 
• The South Africa Government website

Tax & Restructuring: Joubert Botha: joubert.botha@kpmg.co.za
Legal: Melissa Duffy: melissa.duffy@kpmg.co.za