South Africa: Tax relief measures in draft legislation (COVID-19)
South Africa: Tax relief measures in draft legislation
Additional tax relief measures that are intended to counter the adverse impact of the coronavirus (COVID-19) pandemic on the South African economy and workforce are included in revised draft legislation released by Treasury on 1 May 2020.
The revised draft legislation defines “qualifying taxpayers” for purposes of the provisional tax and employees tax relief to include a company, trust, partnership or individual. More taxpayers will benefit from the deferral of provisional tax as a result of an increase in the “qualifying taxpayer” threshold. The tax relief itself, however, remains unchanged, and is proposed as follows:
- For first provisional tax payments, due between 1 April 2020 and ending on 30 September—to be reduced to 15% (normally 50%) of estimated total tax liability without incurring any penalties and or interest as a result of the reduced payment
- For second provisional tax payments, due between 1 April 2020 and 31 March 2021—to be based on 65% of estimated total tax liability, with no interest or penalties to be levied as a result of the reduced payment
- The balance (35%) would need to be paid in full when making the third provisional tax payment—the top-up payment made within six months after year-end
Other measures in the draft legislation concern:
- A framework for the tax treatment of donations of cash or property to COVID-19 disaster relief trusts
- Provisions for donations to a “solidarity fund”
- How to determine days that are not counted under measures of the Tax Administration Act, for purposes of the “lockdown period”
- An exemption for all employers from payment of the “skills development levy” in relation to the four-month period 1 May 2020 to 31 August 2020
- Value added tax (VAT) relief, by allowing certain registered vendors to file their VAT returns on a monthly basis, instead of bi-monthly
Read a May 2020 report [PDF 362 KB] prepared by the KPMG member firm in South Africa
The revised draft legislation also includes measures for employees’ tax deferral of 35% per month for the period 1 April 2020 to 31 July 2020. During this period, interest and penalties will not be payable on deferred amounts.
As relates to employees’ tax, the employer must declare 100% of the employees’ tax on the EMP201. The form will calculate the “pay as you earn” (PAYE) to be remitted at 100% and the taxpayer cannot change this value. The relief amounts in relation to the PAYE relief will not be displayed on the EMP201 form. If an employee were not to elect to use the deferment option, the employer must complete the EMP201 as usual and remit the full tax payment by the due date. Unemployment insurance fund (UIF) contributions must be still calculated and reported as usual (1% is payable by the employee and a matching contribution is by the employer). There is no UIF contribution relief.
Read a May 2020 report [PDF 1.2 MB] prepared by the KPMG member firm in South Africa
The draft bills include proposals in respect of the employment tax incentive—a program aimed at addressing youth unemployment. Among the amendments are provisions that would temporarily amend who is a “qualifying employee” as well as the term “monthly remuneration.”
Read a May 2020 report [PDF 358 KB] prepared by the KPMG member firm in South Africa
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