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South Africa – Tax Concessions Announced to Address COVID-19 Impact on Economy

South Africa – Tax Concessions Announced to Address COV

On Monday, 23 March 2020, the president of South Africa announced unprecedented measures in assisting South Africa in its fight against COVID-19. Most notably, a nationwide lockdown effective for 21 days from midnight on Thursday, 26 March 2020. There were also a number of tax measures put forward affecting employers and employees. Pay-As-You-Earn (PAYE) liabilities, a tax subsidy under the Employment Tax Incentive (ETI), and possible relief on Unemployment Insurance Fund (UIF) contributions.

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Flash Alert 2020-111

On Monday, 23 March 2020, the president of South Africa announced unprecedented measures in assisting South Africa in its fight against COVID-19.1  Most notably, a nationwide lockdown effective for 21 days from midnight on Thursday, 26 March 2020.  The lockdown will be lifted at midnight on Thursday, 16 April 2020.

Below we highlight key aspects of the president’s speech with respect to the taxation measures he unveiled targeting employers and employees.

For the full report, see “Tax and Legal News,” a publication of the KPMG International member firm in South Africa. 

WHY THIS MATTERS

The measures announced are aimed at preventing millions of South Africans from infection whilst saving the lives of hundreds of thousands of South Africans.   The implementation of this safeguard is expected to have an impact on the economy and people’s livelihoods.

Taxpayers would generally only be able to benefit from the tax stimuli if taxpayers are compliant.  As a result, taxpayers would need to make sure that their tax affairs are up-to-date, in respect of all taxes.

Employers may need to adjust their PAYE processes and methods to account for the new PAYE relief.  Withholding and payment with respect to the Skill Development Levy Fund and the Unemployment Insurance Fund may require some adjustment as well.   

COVID-19 – The Benefits of Tax Compliance in Unprecedented Times

The president mentioned several mechanisms that could assist in dampening the negative economic impact that the safeguard could have, including the set-up of a SOLIDARITY Response Fund, which could afford organisations and individuals tax-deductible donations in assisting with the fight against the COVID-19 Epidemic.2  The president went on further to mention certain tax-related mechanisms that could assist businesses given the financial and economic distress in these unprecedented times.  

Overview of Measures Proposed

  • Tax-compliant businesses with a turnover of less than ZAR 50 million will be allowed to delay 20 percent of their Pay-As-You-Earn (PAYE) liabilities over the next four months and to delay a portion of their provisional corporate income tax payments without penalties or interest over the next six months.
  • The South African tax system will provide a tax subsidy of up to ZAR 500 per month for the next four months for those private-sector employees earning below ZAR 6,500 under the Employment Tax Incentive (ETI).  The South African Revenue Service (SARS) will also work towards accelerating the payment of ETI reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.
  • The South African government is exploring the temporary reduction of employer and employee contributions to the Unemployment Insurance Fund (UIF) and employer contributions to the Skill Development Levy Fund (SDL contributions) and to the Commissioner for Compensation for Occupational Injuries and Disease Fund (COIDA contributions). 

KPMG NOTE

We are awaiting further details on the package of fiscal measures announced.  KPMG in South Africa will endeavor to keep readers of GMS Flash Alert apprised of important developments as and when they occur.

FOOTNOTES

1  Refer to the Statement by President Cyril Ramaphosa on escalation of measures to combat COVID-19 Epidemic at the Union Buildings, Tshwane on 23 March 2020. See: https://www.gov.za/speeches/president-cyril-ramaphosa-escalation-measures-combat-coronavirus-covid-19-pandemic-23-mar .

2  See: http://www.solidarityfund.co.za/ .

ZAR 1 = EUR 0.057 | ZAR 1 = USD 0.0576 | ZAR 1 = GBP 0.0487 | ZAR 1 = INR 4.39 

The information contained in this newsletter was submitted by the KPMG International member firm in South Africa. 

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© 2020 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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