Bobby Yerkiah: "The Covid-19 Act provides tools to help both workers and employers."
On 4 June 2020, we speak to Bobby Yerkiah, our Tax Partner at Baker Tilly, to find out the economic, employment, and tax implications of the COVID-19 Act that applies with retrospective effect from 23 March 2020. Excerpts:
1. What are the key aspects of the Covid-19 levy that all employers must be aware of?
The Covid-19 period which was due to last up to 01st June 2020 has been lifted on 30th May 2020 at midnight.
From an Income Tax perspective, a Covid-19 levy has been introduced.
The Covid -19 levy is an amount payable by an employer who benefitted from the Wage Assistance Scheme (WAS). An employer should pay a Covid-19 levy if there is an adjusted chargeable income in his company or société.
It is applicable for the years of assessment starting on 1st July 2020 and 1st July 2021 to an employer who has received an allowance under the WAS.
For companies, individuals, and sociétés having year end during the period from 1st May to 31st December 2020, the levy shall be payable in the Year of Assessment (“YOA”) starting 1st July 2020.
For companies having their year-end during the period from 1st January to 30th April 2021, the levy should be payable as from the YOA starting 1st July 2021.
Employers will pay the lower of the total amount received under WAS or 15% of their adjusted chargeable income.
Individual employers will pay the lower of the total amount paid under WAS or 15% of their net income, subject to specific deductions.
The levy is not applicable if the employer is not liable to Income Tax and the levy should be reported and paid through the annual income tax return.
In the event of non-compliance, the MRA may claim back the amount due within 3 years from the date the levy is payable.
A penalty of 10% of the levy and interest at 1% per month or part of the month will then be applicable on the levy.
In case an employer makes a false or misleading declaration to the MRA, the person will, on conviction, be liable to a fine not exceeding MUR 1 M and imprisonment not exceeding 2 years.
2. What are the main dates and deadlines that all assesses should look out for under the Mauritius Revenue Act?
The MRA has issued a communication on 01st June 2020 stating that:
- Returns that were due during the Covid-19 period should be filed not later than the 25th of June 2020; and
- Tax returns that are due during the month of June 2020 should be filed not later than the 26th of June 2020.
If payments are made after the above dates, the normal penalty and interest will be charged accordingly.
Matters arising at the Assessment Review Committee (ARC) during the Covid-19 period and 21 days post the Covid-19 period have been postponed. They have restarted as from 01st June 2020 or will do so on the 22nd day following the Covid-19 period, respectively.
The deadline to issue assessments, make decision, determination, notice or claim which ended during the Covid-19 period has been extended by 2 months after the Covid-19 period lapses.
Secondly, if the delay for the above ends or falls during a period of 30 days post the Covid-19 period the deadline will be extended by 2 months after the period of 30 days lapses.
The deadline to apply for review under the Expeditious Dispute Resolution Tax Scheme has been extended from 30th June 2020 to 31stDecember 2020.
3. How do the Bank of Mauritius Act, the Companies Act and the Insolvency Act work together to protect the interest of the economy and companies alike?
The measures put in place under the Covid-19 Act include the following:
- The Bank of Mauritius (BOM) will grant MUR 60 BN to assist the government in implementing measures to facilitate economic development.
- The BOM will also invest through the Mauritius Investment Corporation (MIC) into entities for their survival.
- The Public Sector debt will also be subject to amendments to maintain same at an acceptable level.
- Under the Insolvency Act the provision of not allowing voluntary winding up /receivership will prevent loss of employment.
- Contribution to Covid-19 Solidarity Fund is deductible for income tax purposes.
- Financial Statements may be prepared up to 9 months after the balance sheet date.
- The filing of such Financial Statements can be made 3 months after the Covid-19 period.
- Rent unpaid during the period March to August can be paid by end of December 2021. This will not be considered a breach of tenancy agreement.
- The amendments brought by the Covid-19 Act in the Insolvency Act is not applicable to Global Business Company.
- A shareholder /creditor should wait for 3 months after the Covid-19 period to make a resolution for winding up.
- The first creditor`s meeting can be made 10 days after the Covid-19 period.
- Companies subject to the Environment Protection Fee will be exempted from same up to 30th December 2020.
- The work permits for expatriate staff will remain valid up to 30th December 2020.
- Late payment of utility bills and taxes due during the COVID-19 period does not entail automatic penalty and interest.
- Various practical measures have been taken to alleviate additional burden to employers that would normally result from their businesses being in freeze position during these 2 and a half months.
The above will provide breathing space for certain types of businesses. It will help to prevent loss of employment. The influx of money in the economy will also assist in boosting the economy and preventing the depreciation of the Mauritian rupee.
4. What are the main implications of the Workers’ Right Act 2019 that all employees need to be informed of?
Pursuant to the Workers Right Act, workers refer to those whose basic salary is less than MUR 50,000 per month.
The annual leave of an employee may be reduced by 15 days if he had not worked during the Covid-19 period. If an employee had worked during the Covid-19 period, then 7.5 days’ annual leaves may be deducted.
Employees may work from home subject to at least 48 hours’ notice and flexitime is being extended to all workers.
Employers may not terminate employment of workers if they receive financial assistance, whether by way of Wage Assistance Scheme (WAS) or other means.
The above indicates a more flexible approach to employment, whilst ensuring some element of safeguard against termination of employment.
Moreover, payment of overtime or provision of paid time-off for employees in the construction and manufacturing sector are also indicative of openness towards alternative means of remuneration.
With the postponement of contributions to the Portable Retirement Gratuity Fund (PRGF), the government acknowledges that these are difficult times for employers and that PRGF would not be their main priority.
Employers may now directly give 15 days’ notice instead of 30 to the Redundancy Board before reducing workforce or closing down.
Exemption is provided to employers from the existing provisions applicable under a transfer of undertaking for workers in certain specific key sectors, including air traffic control, air transport, civil aviation, health, hospital and port activities is indicative of the thin line the government is stepping, between protection of employment and higher considerations, even at a national level, especially given what we are witnessing these days with our national carrier in voluntary administration.
We also see that with the updated process to be followed by an employer reducing his workforce via the Redundancy Board, there are already quite some applications made to this Board by employers. This is again indicative of the fragile economic environment we are living in.
If an employer commits an offence under the Workers Rights Act, the fine will be up to MUR 25,000 and up to 2 years’ imprisonment. Such sanctions apply retrospectively, i.e., as from 23rd March 2020.
Workers should be aware that measures have been taken to protect their employment, however not all situations are within control of the government. Government has provided for tools to help both workers and employers. We may expect more tools to be provided in the Budget Speech.
5. How is the Covid-19 Act geared to dampen criminal activities in Mauritius?
The Covid-19 Act and the Quarantine Act provide for severe fines and imprisonment. It is a signal that no digression will be tolerated when it comes to tackling any activity which relates to offences in connection with a pandemic.
A curfew is a regulation requiring people to remain indoors between specified hours, typically at night. It is a process used to fight criminality, especially during riots. It has been applied in Mauritius for health-related issues.
With the power to the Commission of Police (the Commissioner) to give permission to whom and for which purpose to be outdoors during a quarantine period, the Commissioner monitors public movement. Traffic police officers may arrest, without warrant, people in public places who do not have the relevant permit. They may even enter premises without warrant. These measures were taken to ensure the population comply with the quarantine provisions. By extension, criminal activity cannot take place if the criminal himself cannot go out to perform his criminal activity during a curfew.
With the increase in maximum penalty level and imprisonment term for various offences specifically related to law and order during and after the COVID-19 period, government further reinforces the means at its disposal to “persuade” us to follow the rules. For example, the breach of curfew order may entail a maximum penalty of MUR 200,000 and 5 years’ imprisonment, which could be for something as mundane as going out to buy bread or for darker/criminal reasons. Most of the fines and imprisonment period regarding offences in the criminal code have doubled. Another example is the wearing of masks and spitting in public.
6. Finally, are there any other key aspects of the Covid-19 Act that you would like to bring to our readers’ attention?
The Covid-19 Act is a quick fix to address the immediate needs and has come into force with retroactive effect from 23rd March 2020. We expect the Budget will provide more measures to address the medium and long-term challenges.
However, there are no proper safeguards regarding the new police powers and new sanctions for breaches of a curfew order could lead to abuse. The retrospective application of new criminal sanctions could be subject to legal challenges from a constitutional perspective.
The Covid-19 Act does not have an expiry date. Therefore, everyone should remain alert until this law is repealed.
The government has taken various steps in various fields to ensure that the population is least impacted by the consequences of the curfew. We must all adapt to this new situation, including the government. We acknowledge that the reduction in movement of people, whether in and out of Mauritius and within the country has had a direct impact on the development of the virus on our grounds. Now, it is time to take off again and aim at new heights.