Updated relief announced by Treasury – what you need to know!
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On 21 April 2020, further tax and relief measures were announced by the President to help South Africans.
We are here to assist you to navigate this challenging period in your business.
Here is what you need to know in a nutshell:
- Skills development levy holiday: From 1 May 2020, there will be a four-month holiday for skills development levy contributions (1 per cent of total salaries) to assist all businesses with cash flow.
- Fast-tracking of value-added tax (VAT) refunds: Smaller VAT vendors that are in a net refund position will be temporarily permitted to file monthly instead of once every two months, to unlock the input tax refund faster and immediately helping with cash-flow. SARS is working towards having its systems in place to allow this in May 2020 for Category A vendors that would otherwise only file in June 2020.
- Three-month deferral for filing and first payment of carbon tax liabilities: The filing requirement and the first carbon tax payments are due by 31 July 2020. To provide additional time to complete the first return, as well as cash flow relief in the short term, and to allow for the utilisation of carbon offsets as administered by the Department of Mineral Resources and Energy, the filing and payment date will be delayed to 31 October 2020.
- A deferral for the payment of excise taxes on alcoholic beverages and tobacco products: Due to the restrictions on the sale of alcoholic beverages and tobacco products, payments due in May 2020 and June 2020 will be deferred by 90 days for excise compliant businesses to more closely align tax payments through the duty-at-source system (excise duties are imposed at the point of production) with retail sales.
- Postponing the implementation of some Budget 2020 measures: The 2020 Budget announced measures to broaden the corporate income tax base by (i) restricting net interest expense deductions to 30 per cent of earnings; and (ii) limiting the use of assessed losses carried forward to 80 per cent of taxable income. Both measures were to be effective for years of assessment commencing on or after 1 January 2021. These measures will be postponed to at least 1 January 2022.
- An increase in the expanded employment tax incentive (ETI) amount: The first set of tax measures provided for a wage subsidy of up to R500 per month for each employee that earns less than R6 500 per month. This amount will be increased to R750 per month.
- An increase in the proportion of tax to be deferred and in the turnover threshold for automatic tax deferrals: The first set of tax measures also allowed tax compliant businesses to defer 20% of their employees’ tax liabilities over the next four months (ending 31 July 2020) and a portion of their provisional corporate income tax payments (without penalties or interest). The proportion of employees’ tax that can deferred will be increased to 35% and the turnover threshold for both deferrals will be increased from R50 million to R100 million.
- Case-by-case application to SARS for waiving of penalties: Larger businesses (with turnover of more than R100 million) that can show they are incapable of making payment due to the COVID-19 disaster, may apply directly to SARS to defer tax payments without incurring penalties. Similarly, businesses with turnover of less than R100 million can apply for an additional deferral of payments without incurring penalties.
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As a firm, our priority in respect of all our Clients, Employees and Associates, is that you all stay safe and healthy during these difficult times.
The partners and associates at MD are trained, experienced and are able to assist you in formulating plans to survive and ultimately thrive in times of crisis – please contact us to assist you with these measures.