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South Africa: Proposed changes to doubtful debt allowance rules, lease receivables

South Africa: Doubtful debt allowance rules

The 2020 Draft Taxation Laws Amendment Bill proposes changes to the rules concerning doubtful debt allowances related to lease receivables.


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Under current tax law, there is an allowance provided to taxpayers for debts that are considered to be doubtful. Changes to this measure (effective beginning in 2019) prohibit all doubtful debt allowances in relation to lease receivables accounted for in terms of IFRS 9. However, these amendments resulted in unintended consequences for certain industries—for example, the property rental sector.

Under the proposed changes, doubtful debt allowances would be allowed on lease receivables that accrued to the taxpayer (for instance, lease receivables that have been included in income). With this change, taxpayers would be able to claim doubtful debt allowances insofar the lease receivable debt has been included in income and is not calculated with reference to future lease receivables.

As proposed, the amendment would only be effective for years of assessment commencing on or after 1 January 2021. 

KPMG observation

Taxpayers would be subject to the current treatment until the effective date, and thus no allowance would be available on lease receivables for all years of assessment that commenced after 1 January 2019 and that begin before the effective date of 1 January 2021.

Read an August 2020 report [PDF 66 KB] prepared by the KPMG member firm in South Africa

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