How to utilise the R500 billion economic support package to benefit your business
President Ramaphosa announced an economic support package during the COVID-19 pandemic equivalent to 10% of South Africa’s GDP. This R500 billion economic support package has been primarily directed at:
Funding the health response to COVID-19;
Assisting the poor and vulnerable;
Stabilising the economy; and
Supporting smaller businesses.
How will the support package be divided?
The R500 billion will be funded through the reprioritisation of spending from the existing budget to the value of R130 billion, with the balance of the funds to be raised from the Unemployment Insurance Fund and other external finance institutions.
The 6 key interventions of the R500 billion support package:
R100 million to help fund the health responseto COVID-19, assisting the health care system care for those infected by the virus and the procurement of personal protective equipment for health workers.
R20 billion for municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities and providing food and shelter for the homeless.
R50 billion boost for grant recipients – Child support grants will be increased by R300 in May and by R500 from June to October. All other grant recipients will receive an extra R250 per month for 6 months. A special Social Relief of Distress grant of R350 will be available for the next 6 months to those who are unemployed and not receiving any form of grants or UIF payments.
R100 billion for the protection of jobs and the creation of jobs.
R200 billion loan guarantee scheme to assist enterprises with operational costs.
R70 billion in tax reliefmeasures for businesses.
How will this support package benefit your business?
Tax Relief Measures:
Claim more from the Employment Tax Incentive Scheme.
Increasing max ETI currently claimable from R1 000 to R1 500 in the first qualifying 12 months and from R500 to R1 000 in the second 12 qualifying months – an increase of R500.
Allowing monthly ETI claim of R500 for employees from the ages of 18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for 24 months, and 30 to 65 who are not eligible for the ETI due to their age.
Accelerating the payment of ETI reimbursements from twice a year to monthly to improve cash flow.
Tax deferrals on PAYE and Corporate Tax
Businesses below the R100 million turnover threshold and who are tax compliant will qualify for tax deferrals.
You can delay 35% of your PAYE (Pay-As-You-Earn) contributions over the next four months (1 April 2020 – 31 July 2020).
Delay a portion of your provisional corporate income tax payments for six months without incurring penalties or additional interest. Pay your deferred payments in equal instalments over 6-months (starting 1 August 2020).
Delay your Provisional Tax payments – Your first provisional tax payment, due from 1 April 2020 to 30 September 2020, can be 15% of the estimated total tax liability (as opposed to the usual 50%). Your second provisional tax payment, due from 1 April 2020 to 31 March 2021 can be 65% of the estimated total tax liability (as opposed to 100% less the first provisional tax payment). The balance is to be paid by a third provisional tax payment to avoid interest charges.
Apply to SARS for deferralsof tax payments if your business exceeds the turnover threshold of R100 million. These applications will be evaluated on a case by case basis.
VAT refunds will be accelerated.
Skills Development Levy and Carbon Tax – A four-month holiday for companies’ skills development levy contributions and a three-month delay for the filing and payment of carbon tax will be introduced.
Loan Guarantee funding of R200 billion via the banking system:
The loan guarantee scheme is meant to offer assistance with regards to operational costs.
Initially, companies with a turnover of less than R300 million a year will be eligible – thereby supporting over 700,000 firms and more than 3 million employees.
Several banks are ready to roll out the product before the end of April 2020, but the details on the access of these funds are not yet clear.
UIF TERS for businesses who cannot pay salaries in full – Click here
Businesses who require urgent support or funding can register on smmesa.go.za
What is our advice to business owners?
Ensure that your tax affairs are in order – only tax compliant businesses qualify for these relief measures.
Monitor your finances and cash flow closely.
Take care of yourself, your team, your clients and your community.
Seek the opportunities that will undoubtedly arise.
Remain calm, be positive and be decisive.
Be safe everyone, stay indoors and look after each other. This crisis will pass! You are not alone. Together, we can do this!
Should you require any further assistance, please do not hesitate to contact us.