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31 Mar 2020
BY Robert Gad AND Jo-Paula Roman

South Africa: COVID-19 | tax relief measures

On Monday, 23 March 2020, the President of South Africa announced a 21-day nationwide lockdown, with effect from midnight on Thursday, 26 March 2020.

In brief, all persons in South Africa are prohibited from leaving their homes for the 21-day period, except if specifically exempted to perform an essential service (health care professionals, food distributors etc.), or to perform specifically permitted activities (such as purchasing essential goods), as such “essential services” and “essential goods” are defined in Regulation R.398 in Government Gazette No. 43148 of 25 March 2020 (“Regulation 398”).

The nationwide lockdown is anticipated to impact the operations of all South African businesses.

Tax relief measures aimed at small, medium and micro enterprises

During the briefing delivered by the president to announce the lockdown, the following tax-related measures (understood to be aimed at small, medium and micro enterprises) were referred to:

  • Tax subsidy in terms of the Employment Tax Incentive (“ETI”) of up to ZAR500 per month for the next four months for private sector employees who earn under ZAR6 500.
  • Accelerated payments of employment tax incentive reimbursements by the South African Revenue Service (“SARS”) from twice a year to monthly.
  • Tax compliant businesses with a turnover of less than ZAR50-million to be permitted to delay 20% of their employee’s tax liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.

The president moreover announced that the South African Government is exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund (“UIF”) and employer contributions to the Skill Development Fund, although no firm commitment has yet been made to this measure.

On Sunday, 29 March 2020, National Treasury released for public comment a draft document containing explanatory notes (click here) on the proposed tax measures in light of the national state of disaster.

In line with the president’s announcements regarding proposed tax relief measures, the draft explanatory notes detail the following proposals:

  • The expansion of the ETI programme for a limited period of four months (1 April 2020 to 31 July 2020) for employers registered with SARS as at 1 March 2020, as follows:
    • Increase in the maximum amount of ETI claimable during the four-month period for employees eligible under the current ETI Act, 2013, from ZAR1 000 to ZAR1 500 in the first qualifying 12 months and from ZAR500 to ZAR1 000 in the second qualifying 12 months.
    • A monthly ETI claim in the amount of ZAR500 during the four-month period 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
      • from the ages 30 to 65, who are not eligible for the ETI due to their age.
    • The deferral of the payment of 20% of the employees’ tax liability of tax compliant “small to medium sized businesses” without the imposition of interest or penalties for late payment, whereafter the employees’ tax so deferred must be paid to SARS in equal instalments over the six month period commencing on 1 August 2020, ie, the first payment in this regard is anticipated to be made by 7 September 2020. Businesses with an annual turnover not exceeding ZAR50-million will qualify for this relief, which will be deemed to have come into operation on 1 April 2020 and end on 31 January 2021.
    • The deferral of provisional tax payments to SARS for tax compliant “small to medium sized businesses”, as follows:

      • The first provisional payment due from 1 April 2020 to 30 September 2020 will be based on 15% of the estimated total tax liability; and
      • The second provisional payment due from 1 April 2020 to 31 March 2021 will be based on 65% of the estimated total tax liability.
      • Small to medium sized businesses in this respect refers to “any company conducting a trade with an annual turnover not exceeding R50million”. The turnover and other eligibility criteria for individuals carrying on businesses are yet to be finalised. Provisional taxpayers with deferred payments will be required to settle their full tax liability when making the third provisional payment in order to avoid interest and penalties.

Draft Bills (together with their explanatory memoranda) to give effect to the above measures, are expected to be released for public comment by 1 April 2020. Comments on the draft explanatory notes and draft Bills can be emailed. The due date for comment has not been announced.

Tax compliance deadlines and interactions with SARS

SARS has for its own part, in a letter issued to tax practitioners, appealed to taxpayers to remain compliant in the timeous fulfilment of their tax obligations.

Notwithstanding the minimisation of face-to-face interactions with SARS consultants and the concerted migration of SARS’ operations to digital channels, SARS has announced that tax practitioners will, in “exceptional circumstances”, be permitted to arrange appointments at a SARS branch.

The COVID-19 TERS/UIF benefit

The Minister of Employment and Labour, Thembelani Thulas Nxesi, has announced that the UIF will assist workers affected by COVID-19 through existing benefits including illness, Reduced Work Time, Unemployment, and a newly developed Temporary Employer/Employee Relief Scheme (or “TERS”).

Employers that are unable to pay the full salaries of employees owing to COVID-19 related preventative measures, are encouraged to apply for the COVID-19 TERS benefit from the UIF by way of email. Applications have been open since the commencement of the lockdown, at midnight on Thursday, 26 March 2020.  

Manual claims to the UIF are not permitted during the course of the lockdown. Prospective applicants have been advised that following the submission of email requests to the dedicated Labour Department email address, they will receive an automated reply detailing procedures and substantive requirements to claim benefits.

VAT and customs duty relief for imported essential goods   

SARS has announced that, owing to the measures implemented to enforce the nationwide lockdown, “essential goods” as defined in Regulation 398 will be subject to an exemption from value-added tax (“VAT”), and a full rebate of customs duties on importation during the COVID-19 pandemic, under Item 412.11/00.00/01.00 of Schedule 1 to the VAT Act, 1991 and rebate item 412.11 of Schedule 4 to the Customs and Excise Act, 1964.

A separate article in this respect will be published under cover of an upcoming ENSafrica publication that will further detail the requirements and implications of this measure.

Matters to further consider

In the coming weeks, it will be important for businesses who enter into compromises or payment arrangements (whether as debtor or creditor) to consider the potential income tax and VAT implications of such undertakings. A topical area in this respect is the deferral or waiving of rental and other payment obligations. The tax implications of these events will be determined, in many instances, having regard to the timing or conditionality of counter-performances, the related-party status of the contracting parties, and the manner in which substitutive contractual terms are structured.

As matters currently stand, there appear to be no income tax relief measures directed at larger enterprises.

The impact that current national and global economic events will have on the proposal of government announced in the 2020 Budget Review to further rationalise the South African assessed loss tax regime will in our view be an interesting space to monitor.

Robert Gad

Tax | Executive

+27 82 567 9082


Jo-Paula Roman

Tax | Associate

+27 82 381 2069



COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.

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