R70bn in tax relief: How it affects businesses, individuals
JOHANNESBURG – The National Treasury announced a further raft of tax measures providing about R70 billion in support to ease the plight of financially distressed South Africans as the lockdown hits households and businesses.
The measures provided relief either through reductions in taxes otherwise payable or through deferrals of tax payments for tax-compliant businesses.
- Skills development levy holiday. From May 1, there would be a four-month holiday for skills development levy contributions (1 percent of total salaries) to assist all businesses with cash flow. This provides relief of about R6bn.
- Fast-tracking of value-added tax (VAT) refunds. Smaller VAT vendors that were in a net refund position would be temporarily permitted to file monthly instead of once every two months, helping with cash flow. The Treasury said the South African Revenue Service (Sars) was working towards having its systems in place to allow this next month for Category A vendors that would otherwise only file in June. Enquiries could be made at [email protected] or 012 315 5000.
- Three-month deferral for filing and first payment of carbon tax liabilities. The filing requirement and the first carbon tax payment were due by July 31. The filing and payment date would now be delayed to October 31.
- A deferral for the payment of excise taxes on alcoholic beverages and tobacco products. Payments due in May and June would be deferred by 90 days for excise-compliant businesses.
- Postponing the implementation of some Budget 2020 measures. The 2020 Budget announced measures to broaden the corporate income tax base by restricting net interest expense deductions to 30 percent of earnings and limiting the use of assessed losses carried forward to 80 percent of taxable income. These measures were postponed to January 1, 2022.
- An increase in the expanded employment tax incentive amount. The first set of tax measures provided for a wage subsidy of up to R500 a month for each employee who earns less than R6 500 a month. This amount would be increased to R750 a month.
- An increase in the proportion of tax to be deferred and in the gross income threshold for automatic tax deferrals. The first set of tax measures also allowed tax-compliant businesses to defer 20 percent of their employees’ tax liabilities over the next four months to the end of July and a portion of their provisional corporate income tax payments. The proportion of employees’ tax that could be deferred would be increased to 35 percent and the gross income threshold for both deferrals increased from R50 million to R100m.
- Case-by-case application to Sars for waiving of penalties. Larger businesses with gross income of more than R100m that could show they are incapable of making payment due to the Covid-19 disaster may apply directly to Sars to defer tax payments without incurring penalties. Similarly, businesses with gross income of less than R100m could apply for an additional deferral of payments without incurring penalties.
- Increasing the deduction available for donations to the Solidarity Fund. The tax-deductible limit for donations at 10 percent of taxable income would be increased by an additional 10 percent for donations to the Solidarity Fund during the 2020/21 tax year.
- Adjusting pay-as-you-earn for donations made through the employer. Employers could factor in donations of up to 5 percent of an employee’s monthly salary when calculating the monthly employees’ tax to be withheld. An additional percentage that could be up to 33.3 percent, depending on the employee’s circumstances, would be provided for a limited period for donations to the Solidarity Fund, lessening cash flow constraints for employees who donate to the Solidarity Fund.
- Expanding access to living annuity funds. Individuals who receive funds from a living annuity would temporarily be allowed to immediately either increase up to a maximum of 20 percent from 17.5 percent or decrease down to a minimum of 0.5 percent from 2.5 percent the proportion they received as annuity income, instead of waiting up to one year until their next contract “anniversary date”, assisting cash flow.