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On 1 April 2020, National Treasury released the COVID-19 Draft Tax Bills, including the Draft Explanatory Memorandum.

The objective of these Bills is to attempt to manage the severe impact of the COVID-19 measures that have been implemented, by granting certain tax concessions. No tax concessions were proposed with respect to the deferral of payment of value-added tax. While tax concessions regarding the deferral of payment of PAYE and provisional tax were proposed, these concessions focus on small or medium sized businesses (i.e. businesses with an annual turnover equal to or less than R50 million). For more information on these concessions, please refer to the  Draft Explanatory Memorandum.

What are the practical implications of the COVID-19 tax measures for large businesses (i.e. businesses with turnover exceeding R50 million)?


A large business constitutes a company with an annual turnover of more than R50 million during the year of assessment ending on / after 1 April 2020 but before 1 April 2021. A large business does not constitute a qualifying taxpayer as contemplated in the COVID-19 Draft Tax Bills. This means that a large business does not qualify for the deferral of payment of PAYE and provisional tax, and that late payment penalties will continue to be imposed on large businesses.


The following measures are available to large businesses:

  • Additional employment tax incentive (“ETI”) claims;
  • Section 18A deduction for donations to registered disaster relief funds; and
  • Request for the remission of late payment penalties.


Tax-compliant employers that were registered with SARS as at 1 March 2020, will be entitled to claim the following additional ETI for the period 1 April 2020 – 31 July 2020:

  • Maximum monthly amount claimable is increased by R500 per month.
  • An additional R500 monthly claim for employees no longer eligible as the employer has already claimed the full allowable ETI for those employees for 24 months.
  • An additional R500 monthly claim for employees not eligible for ETI due to their age (i.e. 30 years and older).


COVID-19 disaster relief funds will, if approved by the Commissioner, be deemed to be Public Benefit Organisations and be subject to the same tax dispensation. Therefore, any donations made to these funds will qualify for a deduction in terms of section 18A of the Income Tax Act No. 58 (1962).


No deferral of payment related relief measures have been proposed for large businesses. This means that the late payment of PAYE, VAT and provisional tax could still result in the imposition of 10% late payment penalties, as well as interest.

The underestimation of the second provisional tax payment could also result in an underestimation penalty of 20%.

Both the late payment penalties and the underestimation penalty constitute percentage based penalties as contemplated in section 213 of the Tax Administration Act No. 28 (2011) (“TAA”).

In terms of section 218 of the TAA, SARS must remit a penalty in exceptional circumstances, where a taxpayer was rendered incapable of complying with relevant tax obligations. These exceptional circumstances include:

  • A natural or human-made disaster;
  • A civil disturbance or disruption in services;
  • Serious financial hardship resulting in an immediate danger that the continuity of the business operations and the continued employment of its employees are jeopardised; or
  • Any other circumstances of analogous seriousness.

Evidently, it may be argued that the COVID-19 pandemic and the consequences of the lock-down have resulted in exceptional circumstances which could hamper corporate tax compliance.

Therefore, where late payment is effected due to these exceptional circumstances, SARS could be requested to remit these penalties. The outcome of a penalty remission request would depend on the facts and circumstances of each case.

Taxpayers should also remember that they bear the burden of proving that exceptional circumstances resulted in the non-compliance. Therefore, taxpayers should be able to prove that they were incapable of making timeous payment, and also be able to present supporting documents to support said contention.

Examples of supporting documentation that could be used to substantiate a penalty remission request include cash flow forecasts incorporating the impact of tax payments on business continuity and the ability to remunerate employees, evidence of business interruptions such as cancelled client agreements, and production records.

While taxpayers are encouraged to continue prioritising corporate tax compliance as far as reasonably possible, it is imperative that taxpayers implement proper tax risk management practices in the upcoming months if they ever find themselves in a position of having to approach SARS to request a remission of penalties.

if you have any queries regarding your corporate tax compliance challenges in these trying times and please follow us on social media  to keep track of tax-related COVID-19 measures.