South Africa: “Phase II” of economic stimulus package (COVID-19)
South Africa: “Phase II” of economic stimulus package
South Africa’s president on 21 April 2020, announced a social relief and economic support package totaling R500 billion, approximately 10% of the gross domestic product (GDP) of South Africa, in response to the coronavirus (COVID-19) pandemic.
The relief measures are set out in three phrases, as follows:
- Phase I: Measures to mitigate the effects of COVID-19 on businesses, communities, and individuals (this phase began in mid-March and includes tax relief and various funding initiatives)
- Phase II: Measures to stabilize the economy by addressing the decline in supply and demand and by protecting jobs
- Phase III: Measures for the recovery of the economy as it emerges from the COVID-19 situation
Some of the key tax measures of Phase II include:
- Qualifying taxpayer: Relief for a “qualifying taxpayer” in the form of provisional tax and PAYE (pay as your earn) deferral arrangements reflects that the threshold for a “qualifying taxpayer” increased from R50 million to R100 million. A reference to “turnover” for determining the threshold (as opposed to “gross income”) is pending clarification.
- Employees’ tax deferral: The 20% of the employees’ tax (PAYE) liabilities for “qualifying taxpayers” may be deferred in relation to the four-month period April 2020 to July 2020. The PAYE amounts deferred will be payable over a six-month period 7 September 2020 to 5 February 2021. This PAYE deferment has been increased from 20% to 35% for “qualifying taxpayers.”
- Skills development levy: A four-month payment “holiday” is provided for these levies (payable by all employers, whether resident and non-resident employers at a rate of 1% of remuneration). The four-month period is assumed to be the same four-month period that applies to the employees’ tax deferment (April 2020 – July 2020).
- Employment tax incentive: No changes were announced.
- Special COVID-19 relief, unemployment insurance fund (UIF): No further changes were announced.
- Donations to solidarity fund: Taxpayers making donations will be able to claim up to an additional 10% as a deduction from their taxable income. It has been proposed that a separate and additional tax deduction be allowed for donations to the solidarity fund. Therefore, a taxpayer may potentially claim a 20% tax deduction depending on who the donations were made to.
- Taxpayers with turnover in excess of R100 million: Relief in the form of tax deferrals is to be provided to businesses that have turnover in excess of R100 million. The determination is to be made on a case-by-case basis.
- Indirect tax relief: Fast tracking of value added tax (VAT) refunds and relief in respect of the carbon tax regime were announced.
Read an April 2020 report [PDF 103 KB] prepared by the KPMG member firm in South Africa
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