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South Africa: Tax considerations for business expenses related to coronavirus (COVID-19)

South Africa: Tax considerations for business expenses

Actions taken by businesses in response to the coronavirus (COVID-19) can result in additional expenses—for which companies need to note possible tax considerations.

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For instance, COVID-19 can have implications on employment and the ability to claim a tax deduction in respect of “retrenchment costs” (redundancies) depends on a number of factors, such as:

  • Whether the retrenchments are as a result of the business closing down and ceasing to trade or whether the retrenchments are a consequence of the need to downsize operations
  • Whether the employer is under a legal obligation to pay the retrenchment costs or is making the payment ex gratia
  • If there is no legal obligation to pay retrenchment costs, whether there is an established practice of making such payments to employees

There are also tax considerations for employers that provide employees with paid leave, concerning whether items of expenditure relating to overhead costs are capital in nature, and for taxpayers that invest in technology that may warrant a shorter write-off period.

Read a March 2020 report [PDF 364 KB] prepared by the KPMG member firm in South Africa

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