The COVID-19 disease outbreak has to date wreaked havoc on global markets, and South Africa has certainly not been immune thereto. In light of serious cash flow pressures experienced by many businesses, an international trend of introducing tax relief mechanisms has emerged. In the South African context, President Cyril Ramaphosa on 23 March 2020 announced inter alia the following relief measures for tax compliant businesses with a turnover of less than ZAR 50 million:
- deferral of 20% of pay-as-you-earn (PAYE) liabilities for four months; and
- deferral of a (to be announced) portion of provisional corporate income tax liabilities for six months, without penalties or interest applying to late payments.
More details regarding the relief will be forthcoming. Whilst any relief is to be welcomed, the limited nature of the proposed relief and no mention of VAT relief is unfortunate. Fortunately, taxpayers are not without remedy when unable to pay their taxes on time due to insufficient cashflow in these circumstances. The Tax Administration Act 28 of 2011 (TAA) provides for a number of poten tial relief measures, including:
- Sections 167 and 168 of the TAA provide for tax instalment payment agreements where a taxpayer suffers from a deficiency of liquidity which is reasonably certain to be remedied in future.
- Section 218 of the TAA provides that SARS must remit administrative non-compliance penalties (including late payment percentage-based penalties) where a ‘natural or human-made disaster’ or ‘serious illness’ has rendered a taxpayer incapable of complying with its tax obligations.
- Section 187(6) of the TAA provides for the remission of interest where a payment was postponed due to circumstances beyond the taxpayer’s control (which circumstances are limited to inter alia a natural or humanmade disaster, or a serious illness).
Paragraph 11 of the Fourth Schedule to the Income Tax Act 58 of 1962 also provides that SARS may issue a directive to an employer to withhold a reduced amount of PAYE (or no PAYE), to alleviate hardship for an employee due to circumstances outside the control of that employee. Considering that the COVID-19 pandemic was declared a national disaster in South Africa on 15 March 2020, the pandemic may well, under appropriate circumstances, constitute grounds to conclude a tax instalment payment agreement, to request the remission of penalties and interest where a taxpayer is unable to pay its taxes on time, as well as grounds for a PAYE directive.
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