Amid the lockdown and its economic ramifications, the Government has presented a range of measures available to South African businesses and individuals in a bid to alleviate some of its most devastating effects.
From loans to tax breaks, most interventions are designed at helping small businesses for a short term. Additionally, there are measures which are likely to aid individuals, the self-employed and the informal sector.
Along with the extension of the lockdown, President Ramaphosa stressed that new urgent economic measures as well as additional support to protect poor and vulnerable households would be carried out.
Until we see the implementation of these new economic measures, the current financial relief measures should be utilised by those facing financial hardship. We have provided a list of the current various relief options to aid businesses, sectors, the self-employed, and individuals below.
ASSISTANCE FOR BUSINESSES
Companies may claim back up to R1,500 a month per employee if that employee earns less than R6,500 and is younger than 30, and R500 for those 30 and older who earn less than R 6,500. These amounts will be paid back every month by South Africa Revenue Services (“SARS”) as part of the Employment Tax Incentive (“ETI”) program. In order to apply for these tax breaks businesses need to apply through the SARS e-filing portal and fill out the necessary documentation: https://www.sarsefiling.co.za/
Delay in Payment of Provisional Tax
Instead of paying 50% of their expected tax bill six months into the tax year (“provisional tax”), companies, if its annual turnover is less than R50 million, are now allowed to pay a minimum of 15% after six months, and another 50% by the end of the tax year. Thereafter, by 30 September 2021 (or six months after the end of its financial year), the company would need to pay the outstanding balance. Thus far no similar tax relief has been offered to companies with turnover of more than R50m. However, the Tax Administration Act (TAA) provides for the remittance of penalties in ‘exceptional’ circumstances.
Delayed Employee Tax Payments
Businesses with an annual turnover of less than R50 million can retain 20% of the PAYE payments they were supposed to hand over to the SARS for the period running from 1 April 2020 through to 31 July 2020. Businesses that qualify do not need to notify SARS, they can simply not pay PAYE and will not face any penalties. However, they must pay back this amount in equal instalments, with the first payment expected on 7 September 2020.
Unemployment Insurance Fund Pay-outs
As part of the special Temporary Employee/Employer Relief Scheme (“TERS”), administered by the Unemployment Insurance Fund (“UIF”), money will be paid out to workers in distressed companies. The amounts paid will be a percentage of an employee’s salary, according to a legislated sliding scale, from 38% (for the highest earners) to 60% (for the lowest earners). The maximum benefit allowed is R6,730 a month. Companies registered with UIF that are struggling to pay salaries due to the coronavirus crisis should report to Covid19ters@labour.gov.za for assistance.
The two main government schemes aimed at small businesses include:
1. The Debt Relief Finance Scheme, which will assist distressed small companies with funding; and
2. The Business Growth/Resilience Facility, which is aimed at small companies to take advantage of supply opportunities resulting from the coronavirus pandemic or a shortage of goods in the local market.
To engage in either scheme, small business must register at https://smmesa.gov.za/. The full list of criteria is available on the website. The Department of Small Business Development advises that money should be paid to small businesses within seven business days, after the approval of their application. The amount paid is determined on a case by case basis by the Department of Small Business Development.
Corporate Rent Relief
The amended Regulations call on large property landlords and retailers to work together on possible rent relief schemes. To this point, what has come to fruition is the industry-wide tenant assistance and retail sector relief packages proposed by The Property Industry Group on 6 April 2020. This initiative is principally focused on supporting affected small, medium and micro enterprises (SMMEs) (businesses with an annual turnover of less than R80 million) and further provides relief to all other retail tenants. More details can be found at: https://sareit.prowly.com/92057-property-industry-group-announces-retail-tenant-assistance-relief-package
ASSISTANCE FOR VARIOUS SECTORS
Financially distressed small-scale farmers who have an annual turnover between R20,000 and R1 million can apply for relief from a R1.2 billion fund administered by the Department of Agriculture and the Department of Rural Development and Land Reform. To apply for this relief measure complete the application form at: www.drdlr.gov.za Applications close on Wednesday 22 April 2020.
The Department of Tourism provides once-off grants of R50,000 to approved small and medium enterprises within the tourism industry. Applications will be evaluated by a panel of experts with preference given to black owned companies. To apply for this relief complete the application form: www.tourism.gov.za/Pages/COVID19tourismrelieffund.aspx
The Industrial Development Corporation (“IDC”) has allocated billions in emergency funding to help manufacturers with working capital, as well as for companies in agriculture, tourism, energy, and vehicle components manufacturing. To apply for this relief complete the application form at: https://www.idc.co.za/2020/03/24/idc-interventions-inresponse-to-covid-19/
The National Film and Video Foundation (NFVF) has invited industry to submit funding applications for script development, animation, and post-production projects. The call for these applications has been pushed forward from August 2020 “to keep the industry busy during this downtime”. The NFVF will provide an additional once-off cash injection of R500,000 to the ten companies currently commissioned by the organisation.
The South African Music Performance Rights Association (SAMPRA) has brought forward the distribution of royalties scheduled for August 2020 to April 2020.
The Government’s new support scheme for spaza shops will provide funding to spaza owners for the buying of stock. This will aid in bulk-buying discounts at approved wholesalers. It is required that spaza shops be registered with the SARS, the UIF, and the Companies and Intellectual Property Commission (CIPC).
ASSISTANCE FOR THE SELF-EMPLOYED
Delay in Payment of Provisional Tax
Those who have a turnover of less than R5 million and earn less than 10% of their turnover from income, interest, dividends, foreign dividends and rentals from leased fixed property are eligible for delayed payment. Instead of paying 50% of anticipated tax after six months into the tax year, and settling the full amount at the end of the tax year, provisional taxpayers are required to pay only 15% after six months, and another 50% by the end of the tax year. The balance is to be paid by 30 September 2021.
ASSISTANCE FOR THE INDIVIDUAL
In accordance with South Africa law, credit insurance on loans, home loans and credit cards are mandatory. This is to cover outstanding debts should you die or become permanently disabled. Instalments will be covered for up to 12 months if you become unemployed or unable to earn an income, not necessarily due to illness. It is important to note that you should be covered even if you are not fired but are put on unpaid leave.
Please see your specific banks’ policies regarding COVID-19 related measures. Many South African banks have announced individual measures to assist clients, some offering a three-month payment holiday on home loans, vehicle finance, personal loans and credit cards.
Individual Rent Relief:
Landlords and tenants are encouraged to communicate amongst themselves and reach a mutual agreement regarding possible rental payment plans. Each situation should be assessed with due consideration to its own merits, and consideration must be given to amongst others, the following aspects:
1. If there was a force majeure or vis major event; and
2. Whether beneficial occupation has been deprived or whether due to the
tenants own doing; and
3. Whether the performance is impossible, not just difficult to perform (this will be determined by reasonableness).
Should you require any assistance on the options discussed above or in applying for funding, please do not hesitate to contact De Abreu and Cohen Inc.