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COVID-19: Additional tax relief, South Africa

23 April 2020
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On 21 April, South African President Cyril Ramaphosa announced further tax relief measures to ease pressure on businesses and individuals and to help cushion the blow of the COVID-19 pandemic.

These measures are in addition to the tax relief measures introduced earlier this month (discussed here) and include the following:

  • A four-month holiday for companies’ skills development levy contributions.
  • Fast-tracking the processing and payment of VAT refunds.
  • A three-month delay for filing and first payment of carbon tax.  No extensions have been announced in respect of any other tax types.
  • The proposals regarding the deferral of provisional tax and pay-as-you-earn (PAYE) payments by qualifying taxpayers (see our previous newsflash) have now been expanded. A taxpayer’s gross income had to be ZAR 50 million or less in order to qualify for the deferral, but this has now been increased to ZAR 100 million per year. In addition, employers will now be able to defer 35% of their PAYE payments (up from the previous 20%).
  • Businesses with a turnover of more than ZAR 100 million per year will have to apply to the South African Revenue Service (SARS) for deferral of tax payments on a case-by-case basis. No penalties will be imposed for late payments if the taxpayers can show they have been materially negatively impacted in this period.
  • Taxpayers who donate to the Solidarity Fund will be able to claim up to an additional 10% as a deduction from their taxable income. The wording in this regard is ambiguous. Section 18A of the Income Tax Act, 1962, currently provides that donations to section 18A organisations will qualify for deduction to the extent that it does not exceed 10% of the taxpayer’s taxable income. The proposed relaxation presumably means that the current 10% threshold will be increased to 20%. However, it could also be interpreted to mean that a taxpayer would be entitled to claim a deduction equal to 110% of the donation.

The Minister of Finance is expected to provide further details on the above and other tax-related announcements at which stage there should be more clarity regarding these measures.

According to President Ramaphosa, these tax measures should provide at least ZAR 70 billion in cash flow relief or direct payments to businesses and individuals.