Deferral of PAYE will help businesses with cash flow, tax expert says

President Cyril Ramaphosa's announcement that the government will defer payment of Pay-As-You-Earn (PAYE) taxes for three months will help companies with cash flows, a tax expert said.

This cash could then be used to pay their employees and for whatever else was necessary to keep them going.

In his address to the nation on Sunday, Ramaphosa said there would be a deferral of PAYE taxes for three months, with an automatic deferral of 35% of PAYE liabilities for employers with revenue below R100m.

He added that the payment of excise taxes by the alcohol sector would be deferred for three months, to ease the burden on the sector as it recovers from lockdown regulations and violent protests and looting.

Ramaphosa said these interventions were designed to extend as much relief as possible to businesses that need support, without compromising the country's fiscal sustainability.

These decisions were welcomed by Business Unity SA (Busa) and the SA Liquor Brand owners Association (Salba).

Sage Africa and Middle East director of product compliance, Yolandi Esterhuizen, said regulations with details on how this deferral on PAYE taxes will work have not yet been published.

“I am almost sure it will work in the same principle that it worked last year, when there was a deferral period which started in April last year. Assuming it will work the same way, it means that employers would only have to pay 65% of all the tax they have withheld from the employees, the total PAYE liability,” she said.

Esterhuizen said employers would have to pay 65% of that over to Sars and the remaining 35% they would not pay over. “But then after let's say, a three-month period, [the 35%] will have to be paid, say in equal instalments until it is paid off.”

The advantage for business is that the SA Revenue Service would not be imposing any penalties or interest on the late payments on this 35%, she said.

“It will help companies in terms of their cash flows, obviously to be able to pay their employees and whatever else is necessary to keep them going.”

Esterhuizen said the regulations, when published, would provide details on when the deferral period would start, and in how many instalments the deferred amount would have to be repaid to Sars.

Salba said the partial opening of sales as well as three months' deferment in excise tax payments due on alcoholic beverages was a huge relief.

Salba chairperson Sibani Mngadi said the industry was nowhere near being out of the woods, especially for the off-site consumption outlets that continues to be restricted to trading from Monday to Thursday.

He said there was no rationale or evidence provided for this decision, in spite of its many requests to secure this from government.

Salba CEO Kurt Moore welcomed the three months' deferment of about R2.5bn worth of excise taxes that Salba had applied for at the beginning of the latest ban.

Busa welcomed Ramaphosa's address. It also said it was ready to support Ramaphosa in ensuring a fit-for-purpose intelligence and security service to be prepared for any further attempts to destabilise the country.

“Finally, we urge the president to order the quick identification and arrest of those who planned the recent insurrection,” it said.

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