The rapid spread of COVID-19 has resulted in disruptions that have impacted every sector of the economy. COVID-19 is now national disaster in terms of the Disaster Management Act 57 of 2002, with a nationwide lockdown that commenced on 26 March 2020. How do taxpayers and corporates meet the 31 March 20202 deadline, and is there relief in these circumstances?
Since the outbreak COVID-19, the South African Revenue Service (SARS) has released various media statements and updates of the impact of COVID-19 on their operations. Among others, Commissioner Edward Kieswetter announced increased hygiene measures, the closure of trade ports, and the suspension of tax mobile units and workshops. The Commissioner, however, reiterated that SARS would have to balance collecting revenue and facilitating service to taxpayers, travellers and traders, with taking reasonable measures to protect its officials.
Because of the lockdown, many disrupted taxpayers will have missed the 31 March 2020 filing deadline, which may result in SARS imposing interest and late payment penalties. Prioritised spending or financial distress could be the new normal for many taxpayers who will be asked to dig very deep into their pockets for these penalties.
But there is relief in terms of section 187 and section 218 of the Tax Administration Act 28 of 2011(TAA) where the circumstances are beyond the control of taxpayers. According to section 187(6) of the TAA, a senior SARS official may direct that the levied interest attributable to circumstances beyond the control of the taxpayer may be remitted. Section 187(7) of the TAA define the circumstances as:
- a natural or human-made disaster
- a civil disturbance or disruption in services or
- A serious illness or accident.
Where late payment penalties are concerned, the TAA provides for the remittance of the late payment penalties in exceptional circumstances. Specifically, section 218(2)(a)–(c) prescribes the above circumstances as exceptional circumstances, where SARS may consider to remit the late payment penalty imposed.
It is arguable that the provisions of section 187 and 218 of the TAA may find application, since COVID-19 is classified as a natural disaster in terms section 27 of the Disaster Management Act 57 of 2002. The lockdown that began on 26 March 2020 will means a civil disturbance resulting in a disruption of services.
Where interest and late payment penalties are levied on taxpayers, taxpayers may rely on the provisions of section 187 and section 218 of the TAA to arguing for its remittance.
Many counties have offered relief: in the US, the Internal Revenue Service(IRS) announced a three-month deferral income tax payments without penalties, while in the UK and Her Majesty's Revenue and Customs (HMRC) announced a six-month deferral of income tax assessments without interest and penalties.
The COVID-19 events are both an exceptional circumstance and natural disaster. SARS should follow the examples of many other tax authorities and defer the tax filing obligations, allowing for the remittance of interest and late payment penalties.
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