“I’ve seen a lot of reference in the media about new tax measures that Government wants to implement to cushion the blow of the Covid-19 pandemic. What are these and how can they benefit me and my business?”
Most households and businesses have suffered losses in income as a result of the Covid-19 lockdown, necessitating Government to step in and provide measures to assist individuals and businesses to survive the pandemic and its fallout, and have to this extent tabled tax amendment bills with proposed measures.
Each measure has its own complexity and requirements, but one can broadly summarise them as follows:
- Skills development levy holiday: As from 1 May 2020 there will be a four month holiday for skills development levy contributions to assist businesses with cash-flow.
- Fast tracking of VAT refunds: Smaller VAT vendors who are in a net refund position will be temporarily allowed to file monthly instead of once every two months, which will unlock the input tax refund faster and immediately help with cash-flow.
- Three month deferral for filing and first payment of carbon tax: The filing requirement and the first carbon tax payments were due by 31 July 2020. However, to provide cash-flow relief the payment date has been extended to 31 October 2020.
- Deferral for the payment of excise taxes on alcoholic beverages and tobacco products:
Due to the restrictions on the sale of alcohol and tobacco products, payments due in May 2020 and June 2020 will be deferred by 90 days.
- Postponing the implementation of certain Budget 2020 measures: During the budget speech it was announced that certain measures would be implemented to broaden the corporate income tax base by (i) restricting net interest expense deductions to 30% of earnings; and (ii) limiting the use of assessed losses carried forward to 80% of taxable income, which measures were to commence on 1 January 2021. These measures have now been postponed to 1 January 2022.
- Employment tax incentive: A wage subsidy of R750 shall be paid to all employees who earn less than R6,500.00 per month.
- Deferral of provisional tax and employees tax (PAYE): Businesses with a gross income of up to R100 million will be able to defer provisional tax payments and 35% of their PAYE payments. Businesses with an income of more than R100 million can apply to SARS to have these payments deferred.
- Deductions available for donations to the Solidarity Fund: The tax deductible limit for donations will be increased by an additional 10% during the 2020/21 tax year.
- Adjusting PAYE for donations made through the employer: The senior employees of many businesses have announced that they will donate a third of their salaries to the Solidarity Fund. This however resulted in cash-flow difficulties from a PAYE perspective. In terms of legislation an employer may reduce the employee’s remuneration for PAYE withholding purposes by the amount of donations made (capped at 5%). This has now been amended to 33,3% for donations made to the Solidarity Fund.
- Expanding access to living annuity funds: Individuals who receive income from a living annuity will temporarily be allowed to immediately either increase (up to 20%) or decrease (to a minimum of 0.5%) the proportion they receive has annuity income, instead of having to wait until the next anniversary date of the contract.
These measures will be given effect in terms of two amendments bills, namely the Draft Disaster Management Tax Relief Bill and the Draft Disaster Management Tax Relief Administration Bill.
Our advice would be to contact your auditor or financial advisor to discuss how these amendments could potentially benefit you and your business.