COVID-19 Lockdown – Support For Business
Update 3 April:_A resource which may be of use to you is the “Disaster Management Tax Relief FAQ’s_”, created by SARS. Contents of note within this document are:
- An outline of the requirements to be able to claim employee’s tax relief
- An outline of the expansions made to the Employment Tax Incentive (ETI)
- A worked example of how the 20% PAYE tax deferral will work
Please note that there is also information on provisional tax deferral. We regret to inform you that this is beyond our scope of services and so we are not able to assist with this scheme.
Please note: The information provided in this blog is correct at the time of writing, but as this is an unprecedented and ever-changing situation, we will do our best to ensure we keep ourselves and our clients up to date. Please check back regularly for updates – we will also notify you of these by email and system notifications.
Should you have any queries over the content or processes to follow within this blog, please contact our support team via support@simplepay.co.za.
Update 31 March: Link added to the COVID-19 Temporary Employer-Employee Relief Scheme.
As mentioned in our previous blog, which outlined the various support options for employers with respect to their employees, there are also a number of Government initiatives being implemented to help support businesses through the lockdown period.
In this blog, we will provide a brief overview on schemes that could provide support to businesses in general, but also for businesses working in specific sectors.
Opportunities for Businesses to Claim Tax Relief
During the address by Ministers in the Economic Cluster on 24 March, a number of pledges were made to help support businesses over the coming period.
One such measure permits tax compliant businesses with a turnover of less than R50 Million to delay 20% of their EMP-201 liability over the next 4 months. We are awaiting guidance on how this is to be administered, so we will update you as to whether any changes are needed when we know more.
Additionally, a portion of corporate income tax can be delayed for 6 months, with both the EMP-201 and corporate schemes having no penalties or interest accrue over their respective periods.
We’d like to remind and encourage all qualifying employers to avail themselves of the existing relief in the form of the Employment Tax Incentive (ETI). There is a draft proposal to expand this relief via a R500 per month subsidy. It has been proposed that this additional relief will be available for employers who were registered with SARS as at 1 March 2020 and will run between 1 April and 31 July 2020.
Additionally, there are prospects for the temporary reductions of Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL) contributions.
We are awaiting announcements on the measures mentioned in this paragraph and will update you as soon as we know more.
Opportunities for Businesses to be Supported by the COVID-19 Temporary Employer-Employee Relief Scheme (TERS)
COVID-19 TERS is a scheme which is aimed at providing support to businesses that are in distress due to the COVID-19 pandemic. If a company has their funding approved, the UIF will fund companies which are directly affected by COVID-19 in the form of a TERS allowance. The default length of funding is for 3 months.
Please find the link to the COVID-19 TERS Blog here.
Support for Small, Medium and microsized Enterprises (SMMEs)
In her speech on the 24 March, Ms Khumbudzo, Minister for Small Business Development laid out plans to support SMMEs during the lockdown period. R2 billion was donated by the Rupert & Oppenheimer families, solely to support small businesses and their employees. This is intended to be done in multiple ways, through the Business Growth and Resilience Facility, as well as the SMME Debt Relief Finance Scheme.
In order to qualify for the schemes, Ms Khumbudzo laid out qualifying criteria, namely the SMME, self employed individual or small company must:
- Have been registered with CIPC by at least 28 February 2020
- Be 100% SA owned
- Employ at least 70% South African citizens
- Be SARS & UIF registered and compliant.
- (Non-compliant SMMEs can still apply, but they will only be considered when they are fully compliant.)
- Be registered on the national SMME database (www.smmesa.gov.za).
- Be able to show that it was negatively affected by the COVID-19 pandemic.
Businesses owned by women, the youth demographic and people with disabilities will be given preferential treatment for funding. If your company does not meet all of the above criteria, the Small Enterprise Development Agency (SEDA) can assist you in becoming compliant.
The application forms for the schemes detailed below are to be released on 2 April, so it is advisable to ensure that your company is registered on the SMME database and you have inspected your SARS & UIF compliance to see where you stand.
Debt Relief Finance Scheme
The aim of this scheme is to fund working capital for self employed and informal workers and is the “safety net” the president referred to in his lockdown speech on 23 March. The intention is to run the scheme for 6 months, with working capital being loaned at a rate of prime less 5%. The size of the facility available to each SMME will be determined by comparison of their cashflow before and after COVID-19.
Additionally, Small Enterprise Finance Agency (SEFA) funded SMMEs will be able to take advantage of a payment holiday, removing loan obligations for 6 months. The deferment of the loans will not be capitalised, meaning that you will not pay any interest for the 6 month period. SEFA SMMEs will also be able to benefit from an audit to determine whether the client could benefit from a debt restructuring, with options such as converting to longer loans and additional funding to be explored.
The specific requirements for the Debt Relief Finance Scheme are found here.
Business Growth and Resilience Facility
In this scheme businesses geared to take advantage of the supply opportunities and shortages resulting from the COVID-19 pandemic will be able to partake in the scheme.
Working capital will be funded, but only for those that are directly linked to the direct cost of the business. The amount of funding will be based on the individual needs of the business, with loans being made at prime less 5%. In an attempt to dissuade any abuse of the scheme, if any entity is found to abuse this beneficial rate, they will be forced to repay the loan in full at prime plus 10%.
The page relating to the requirements can be found here.
SMMEs are encouraged to make use of the alternative support email and hotline number in preparation for the release of the application forms on 2 April. The contact details are info@dbsd.gov.za & 0860 633 7867.
Solidarity Fund
In the president’s speech on 23 March, there was mention that seed capital will be provided for the Solidarity Fund. The fund will be administered by a team made up of financial institutions, accounting firms and the Government.
The aim of the fund is to alleviate the suffering and distress the virus inflicts on the country through: preventive measures to flatten the curve; more widespread testing to help detect new cases; caring for those who have contracted the disease; and supporting families affected. If you are in the position to be able to donate to the solidarity fund, you can do so at www.solidarityfund.co.za.
As always, we’re here to help where we can. Please feel free to get in touch if you need help with any of the above on SimplePay.
Take care, stay home, stay safe.
Team SimplePay
Should you have any queries over the content or processes to follow within this blog, please contact our support team via support@simplepay.co.za.