Treasury confirms second round of COVID-19 tax relief measures
Updated: Sep 8, 2020
Author: Marissa Wessels – Associate
*Article supervised by Riëtte Engels-van Zyl – Director
Following the President’s latest address on 21 April 2020, National Treasury has issued a media statement detailing further tax relief measures aimed at alleviating the severe financial impact of the COVID-19 pandemic on businesses and individuals alike.
The additional tax relief measures, which are expected to provide around R70 billion in support, either through reductions in taxes otherwise payable or through deferrals of tax payments for tax compliant businesses, include:
A four-month Skills Development Levy (SDL) contribution holiday for all businesses starting 1 May 2020;
Fast-tracking of Value Added Tax (VAT) refunds by allowing smaller VAT vendors to file monthly, as opposed to bi-monthly VAT returns starting from May 2020;
A three-month deferral (from 31 July 2020 to 31 October 2020) for the filing and first payment of carbon tax liabilities;
A 90-day deferral available to excise compliant businesses for the payment of excise taxes on alcoholic beverages and tobacco products due in May 2020 and June 2020;
Postponement of the implementation of certain Budget 2020 measures (including (i) the restriction of net interest expense deductions to 30% of earnings and (ii) the limitation of the use of assessed losses carried forward to 80% of taxable income) from 1 January 2021 to 1 January 2022;
An increase in the expanded employment tax incentive to allow for a wage subsidy of up to R750 (previously R500) per month for employees earning less than R6 500 per month;
Increasing the deferrable proportion of employees’ tax (which concession is available to employers until 31 July 2020) to 35% (previously 20%) and increasing the gross income threshold for automatic tax deferrals from R50 million to R100 million;
Provision for smaller businesses (with gross income of less than R100 million) to apply to SARS on a case-by-case basis for additional deferral of payments over and above existing concessions without incurring penalties; and
Provision for larger businesses (with gross income in excess of R100 million) that can demonstrate their inability to make payment due to the COVID-19 pandemic to apply to SARS on a case-by-case basis for the deferral of tax payments without incurring penalties.
Treasury has also announced specific tax relief measures aimed at encouraging donations to the Solidarity Fund, including:
Increasing deductions available for donations to the Solidarity Fund from 10% of taxable income to 20% for the 2020/21 tax year;
Temporarily allowing Pay-As-You-Earn (PAYE) adjustments for Solidarity Fund donations made through employers of up to 33.3% (ordinarily 5%) of an employee’s monthly salary depending on that specific employee’s circumstances; and
Temporarily expanding access to living annuity funds by allowing individuals who receive funds from a living annuity to temporarily immediately either increase (up to a maximum of 20% from 17.5%) or decrease (down to a minimum of 0.5% from 2.5%) the proportion they receive as annuity income, instead of waiting up to one year until their next contract anniversary date.
The above measures are expected to be gazetted by 30 April 2020.
The National Treasury media statement can be accessed at http://www.treasury.gov.za/comm_media/press/2020/20200423%20Media%20statement%20-%20Further%20tax%20measures%20to%20combat%20COVID-19.pdf.
Contact our Tax team for further information, to find out if you or your business qualifies for tax relief and/or further assistance in interpreting the applicability of the proposed relief measures to your business.
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