Further Tax Measures To Combat The Covid-19 Pandemic

“I have faith in the strength and resilience of ordinary South Africans, who have proven time and time again – throughout our history – that they can rise to the challenge.”

Almost 4 weeks into the national level 5 total lockdown, President Cyril Ramaphosa, addressed our nation again on 21 April 2020. 

The second set of measures from Government aims to further assist individuals and businesses, as there is a critical need to assist with job retention in this time of economic distress. 

These measures and interventions include: 

• Fast tracking of VAT refunds: 
  • Smaller VAT vendors that are in a nett refund position, will be temporarily be permitted to file their VAT201 returns monthly (instead of bi-monthly).
  • SARS is working to have systems in place as from May 2020. 
    
    
• Skills Development Levy holiday: 
  • As from 1 May 2020, there will be a four-month holiday for skills development levy contributions, to assist all employers with cashflow. This provides a relief of R 6 billion. 
  • All employers who are registered for SDL automatically qualify for this payment holiday.
  • The SDL payment holiday will automatically be provided for EMP201 returns May 2020 to August 2020.
    
    
• Deferral of 35% of the PAYE liability for four months for businesses –
  • with expected turnover of less than R100 million, 
  • that is fully tax compliant,
  • that is registered for PAYE as at 1 March 2020.

This deferral will be for the April 2020 to July 2020 payroll liability. 

• • Employers making use of this tax relief must pay back the total deferred PAYE liability in six equal instalments:
    • 7 September 2020
    • 7 October 2020
    • 6 November 2020
    • 7 December 2020
    • 7 January 2021
    • 5 February 2021.
  • Note must be taken to not deviate from these instalments, as this will result in penalties and interest being imposed.
    
    
• Increase in the expanded Employment Tax Incentive (ETI) amount.
  • The initial subsidy of R500 per month for each employee earning less than R6 500 per month, is increased to R 750.
  • This will have an effect of around R 15 billion savings in the pocket of the employer.
  • Take note to limit the ETI utilised to the lessor of:
    • ETI calculated, or
    • 65% of the PAYE liability.
      
      
• A case-by-case application to SARS for waiving of penalties.
  • Large businesses (with gross income more than R 100 million) may apply directly to SARS to defer tax payments if they can provide proof of incapability of making payment of taxes due to the Covid-19 disaster.
  • Smaller businesses (with gross income less than R100 million) can apply for additional deferral of payment without incurring penalties.
    
    
• Individuals donating to the Solidarity Fund:
  • Currently, the tax-deductible limit for donations, is 10% of taxable income. This will be increased to 20% for donations to the Solidarity fund for the 2020/2021 tax year.
  • Employers may adjust PAYE monthly liability on the payroll system to factor in up to 5% of the employee’s monthly salary.
    An additional 33.3% will be provided for a limited period, for donations to the Solidarity Fund.
    
    
• A three-month deferral for Carbon Tax Liability.
  • The filing requirement and first carbon tax payment, which was due by 31 July 2020 will be delayed to 31 October 2020.
  • This will provide a cash flow relief of around R2 billion.
    
    
• Living Annuities – access expanded.
  Individuals receiving living annuities, will be allowed to either
  • Increase (from 17.5% currently to a maximum of 20%) or
  • Decrease (from 2.5% currently to a minimum of 0.5%)

the proportion they receive as annuity income, instead of waiting for their contract “anniversary date”

• Deferral of payment of Excise Taxes on alcoholic beverages and tobacco products.
  • Due to the restrictions on the sale of alcoholic beverages and tobacco products, payments due in May 2020 and June 2020 will be deferred by three months for excise compliant businesses.
  • As excise duties are imposed at the point of production, and with the current restrictions, this will provide short term cash flow relief of around R6 billion.
    
    
• Other 2020 Budget Postponements:
  • Net interest expense deduction limitation of 30% of earnings, and
  • limiting the use of assessed losses carried forward to 80% of the taxable income (this was 100%)

Both measures were to be effective for years of assessment commencing on 1 January 2021. This will be postponed to at least 1 January 2022. 

"My Fellow South Africans, 

We shall recover. 

We shall overcome.

We shall prosper.

May God bless South Africa and protect her people.

I thank you."

Resources

http://www.thepresidency.gov.za

http://www.treasury.gov.za

https://www.sars.gov.za

http://www.gpwonline.co.za/Gazettes

Disclaimer

It is notes that these facts are based on the most recent developments as at 26 April 2020. Changes are still underway to accommodate the situation.