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Covid-19 SME Relief Funding
STATEMENT BY PRESIDENT CYRIL RAMAPHOSA ON FURTHER ECONOMIC AND SOCIAL MEASURES IN RESPONSE THE COVID-19 EPIDEMIC
UNION BUILDINGS, TSHWANE
21 APRIL 2020
We are now embarking on the second phase of our economic response to stabilise the economy, address the extreme decline in supply and demand and protect jobs.
As part of this phase, we are announcing this evening a massive social relief and economic support package of R500 billion, which amounts to around 10% of GDP.Poverty and food insecurity have deepened dramatically in the course of just a few weeks.
To reach the most vulnerable families in the country, we have decided on a temporary 6-month Coronavirus grant.
We will direct R50 billion towards relieving the plight of those who are most desperately affected by the coronavirusThis means that child support grant beneficiaries will receive an extra R300 in May and from June to October they will receive an additional R500 each month.
All other grant beneficiaries will receive an extra R250 per month for the next six months.
In addition, a special Covid-19 Social Relief of Distress grant of R350 a month for the next 6 months will be paid to individuals who are currently unemployed and do not receive any other form of social grant or UIF payment.
CLICK HERE The Department of Social Development will issue the requirements needed to access and apply for this funding.
We have recognised that the food distribution capacity of government is not adequate to meet the huge need that has arisen since the start of the epidemic.
The South African Social Security Agency – SASSA – will within days implement a technology-based solution to roll out food assistance at scale through vouchers and cash transfers to ensure that help reaches those who need it faster and more efficiently.In addition, to fill the immediate need, the Department of Social Development has partnered
with the Solidarity Fund, NGOs and community-based organisations to distribute 250,000
food parcels across the country over the next two weeks.
CLICK ON LINK BELOWUIF_GUIDE_FOR_EMPLOYERS_AND_EMPLOYEES_APRIL_2020.pdf
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a victim of the COVID-19 virus
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Nicky Oppenheimer (Gallo)
- The money will be paid out directly to employees of small, medium and micro-sized businesses as interest-free loans. Employees themselves will not be liable to pay the money back, but companies will be.
- The money will be paid out directly as interest-free loans to employees of businesses with a turnover of less than R25 million a year. Employees themselves will not be liable to pay the money back, but companies will be.
- The loans will be interest-free for a five-year period. “If businesses are unable to repay the loan, SAFT will work closely with SMMEs to ensure that repayment plans are in place which are sustainable for the business concerned.”It is expected that the typical loan amount per employee will be around R750/week, for a period of 15 weeks.
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- Entrepreneurs (formal sole proprietors) can get a cash payment of R25 000 - which doesn't need to be repaid.
- Businesses can also get the cash payment, plus a low-interest loan of up to R1 million.
- The loan comes with a 12-month repayment holiday.
There are two options. Entrepreneurs (formal sole proprietors) can get R25 000 in cash – which is a once-off grant, and doesn’t have to be repaid.
Companies – as well as close corporations and trusts – can also get the cash payment of R25 000, plus a low-interest loan with a 12-month repayment holiday. Loans of between R250 000 and R1 million are available.
These businesses need to be tax compliant and have to show that they were viable before the novel coronavirus hit.“When applying, these entities will therefore be required to submit documents and supporting evidence to corroborate that it is a viable business that was impacted by COVID-19. This proof can be a demonstration of a decrease in turnover, erosion of working capital, or inability to pay salaries,” says Ben Bierman, managing director at Business Partners, which funds entrepreneurs.The newly established Sukuma Relief fund will be administered by Business Partners.
Formal sole proprietors will need to provide proof of an active bank account to show business activity prior to the pandemic, and also need to be tax compliant. (A sole proprietorship is a business that is managed and owned by an individual, and the income from the business is included in his or her own income tax return.)Payouts will be made within seven days of application, if approved. “We understand that many businesses are currently in need of immediate financial relief,” says Bierman.APPLY HERE Help for taxpayers:Tax breaks, relaxed rules for companies, some individuals amid crisisTreasury has announced new emergency measures to boost companies' cash-flow and prevent job losses due to the coronavirus crisis.
- This includes that companies can now get R1 500 a month back per worker (who earn less than R6 500) they employ.
- Provisional taxpayers also only have to pay 65% of their tax liabilities in the current tax year.
In a statement released by Treasury on Monday, government confirmed details of emergency measures that will help ease the tax repayment burden on some businesses and provisional taxpayers.
Treasury says the majority of South African employers during the coronavirus crisis are likely to experience "severely reduced revenue", and may have to consider cutting staff numbers. It is hoped that the new tax measures - which are only temporary - could help curb these job losses and prop up dwindling cash flows.
Here are the three main proposals:
Companies can cliam back up to R1500 a month per employee. Government will extend its existing Employment Tax Incentive (ETI) programme, aimed at young workers, to all ages – and it will hike the amount of money companies can claim.
Currently, for every worker who earns less than R6 500 and is younger than 30 years, employers can claim back R1 000 a month in the first year of employment and R500 in the second year of employment from the SA Revenue Service. This is done by claiming back the amount of employees’ tax (PAYE) they paid to SARS, which reimburses these amounts twice a year.Now, companies will able to claim R1 500 in the first year and R1 000 in the second year for employees younger than 30.
Also, companies will get R500 for all workers up to the age of 65 who earn less than R6 500 a month. For young workers who have already been covered by the ETI payments for two years, employers will get R500 for each of them.
And SARS will pay back the PAYE reimbursements every month – instead of twice a year.
Treasury says this will help get cash into the hands of tax compliant employers as soon as possible.
Small and medium-sized business can delay paying PAYE tax to SARSCurrently, businesses deduct PAYE tax from employees and have to pay it over to SARS within seven days after month-end. They face penalties and interest if the payments are late.
Now, for the next four months, companies can keep 20% of the PAYE payment – without any facing penalties or interest.
But they will have to pay back this amount in equal instalments, with the first payment expected on 7 September 2020.
This offer is only open to businesses with an annual turnover below R50 million, provided they don’t have any outstanding tax returns or tax debt. Delay in payment of provisional taxCurrently, every provisional taxpayer (these are companies and individuals who earn income other than a salary) must make two tax payments a year. The first is 50% of what the taxpayer estimates the total liability will be for the year, and it is paid within the first six months of the tax year. The second comes at the end of the tax year, and is the actual tax amount for the year, minus the first payment. Penalties for late payment, or under payment, are levied, together with interest.
Now, provisional taxpayers will only have to pay 15% of the estimated total tax liability for the first provisional tax payment. The second provisional tax payment will be based on 65% of the estimated total tax liability. The outstanding amount must be paid 30 September 2021 (or six months after a company's financial year-end), to avoid interest charges.
Take this example: a company’s financial year ends on 28 February and it estimates that it will have to pay R800 00 in tax for the year. Its first payment (due by 31 August 2020) will be R120 000 (15% of R800 000). In the past, it would have had to pay 50% - or R400 000. Then, by 28 February it has to pay R400 000. For the year, it paid R620 000 – which is 65% of the total amount. The remaining balance of R280 000 needs to be paid by 30 September 2021 to avoid interest charges.
These measures will apply to companies with an annual turnover of less than R50 million. While it hasn’t finalised which individuals would be eligible, Treasury says that it will probably be those who have a turnover of less than R5 million and don’t earn more than 10% of their turnover from interest, dividends, foreign dividends, rentals from letting fixed property and pay received from an employer.
“Allowing for a deferred payment of provisional liabilities should assist these businesses by providing additional cash flow during the crisis. This could be the difference between pushing a small or medium sized business into liquidation, or providing some space for the business to get through the crisis and add to the economic recovery, hopefully being a source of higher tax revenue in the medium term,” Treasury said.
Both companies and individuals can’t have any outstanding tax debts, or tax returns to be eligible for this relief.
Whilst these measures are welcome and do offer relief to taxpayers, it is possible that some taxpayers will be excluded from the relief offered as their tax affairs are not in order, says Natalie Napier, a tax consultant with Evershed Sutherland. “For the non-compliant taxpayers there may still be the opportunity of seeking some form of deferral or compromise with SARS, as in the current circumstances, the collection of outstanding taxes may otherwise become impossible and it may still be to the best advantage for SARS to collect some taxes, albeit not the full amount owing.”
Payouts of up to R6 700 per month: This is what workers in struggling firms could get from govtUIF benefits
Last week, government gazetted new details to about the Covid-19 Temporary Relief Benefit scheme, which will see the Unemployment Insurance Fund pay out money to companies who can’t afford it, to help pay salaries.Employers whose businesses have been crippled by the coronavirus crisis can apply for funding to help cover worker salaries.
- The biggest payout may be up to R6 732 a month (for those earning more than R17 702), and the minimum will be in line with the minimum wage.
- But each company will first have to prove how badly the crisis hit them, before payments will be considered.
Employers who have had to close their businesses due to the lock down, and can’t afford to pay their employees, may apply for money from government to help pay salaries.
The Covid-19 Temporary Relief Benefit will cover a period of up to three months – during the lock down, and also afterwards, if companies continue to struggle with their cash flow.
Companies will have to prove that their businesses have been severely damaged by the coronavirus crisis before they will get access to funding.
The payouts, called the special Temporary Employee/Employer Relief Scheme (TERS) and administered by the Unemployment Insurance Fund, will work on the same principal as maternity benefits. If a company can still afford to pay employees a part of their salaries, the TERS money will “top up” these payments – but employees can’t earn more than 100% of their current salaries.
The amounts paid will be a percentage of an employee’s salary, according to a legislated sliding scale from 38% (highest earners) to 60% (lowest earners).
The sliding scale stops at R17 702: All workers earning more than this will only get the 38% maximum benefit, which is R6 730 a month. (Previously Cosatu interpreted the gazetted regulations that the maximum payout would be R17 712 a month, but new stipulations from the UIF indicate that this is wrong.)
Companies who are struggling to pay salaries due to the coronavirus crisis, need to report this per email to Covid19ters@labour.gov.za">Covid19ters@labour.gov.za. They will receive an automatic response outlining the application process.
Each company will be judged on its own individual merits before the Covid-19 Temporary Relief Benefit will be extended to them.
Companies need to be registered with the UIF already to secure payments for their workers. But the normal UIF rule that employees would accumulate one day’s payout for every four days’ work (up to certain maximums) will fall away for this benefit. All workers at approved companies will be entitled to these payments.
Last week, new wage payment regulations were gazetted for the clothing sector. According to those regulations, the UIF and employers will take turns to make weekly wage payments to employees during the lockdown.
More of these industry arrangements by bargaining councils are possible, which will vary from the normal TERS regulations, says Jan Truter, director of the labour law advisory platform Labourwise. The UIF has systems in place whereby UIF funds will be released to the bargaining councils, which can then be released to employees on a regular basis during the lockdown period.
The UIF has assets of about R180 billion and both Cosatu and Business Unity South Africa have pressured government to use the money to help workers in need.