An increase in the expanded employment tax incentive 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 at a total cost of around R15 billion. An increase in the proportion of tax to be deferred and in the gross income threshold for automatic tax deferrals: The first set of tax measures also allowed tax compliant businesses to defer 20 percent 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 be deferred will be increased to 35 percent and the gross income threshold for both deferrals will be increased from R50 million to R100 million, providing total cash flow relief of around R31 billion with an expected revenue loss of R5 billion.
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, thereby unlocking 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.
- Provisional Tax
See the following measures aimed at assisting small to medium-sized businesses (individuals, companies, and trusts (including micro-businesses) to alleviate cash flow problems for compliant provisional taxpayers:
Deferral of a portion of the payment of the first and second provisional tax liability to SARS, without SARS imposing penalties and interest for the late payment of the deferred amount;
The first provisional tax payments due from 1 April 2020 to 30 September 2020 will be based on 15 percent of the estimated total tax liability, while the second provisional tax payments due from 1 April 2020 to 31 March 2021 will be based on 65 percent of the estimated total tax liability (after deducting the 15% payment amount received from the 1st period into account);
Provisional taxpayers with deferred payments will be required to pay the remaining 35% tax liability when making the third provisional tax payment in order to avoid interest charges on assessment.
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. This is expected to provide short term assistance of around R6 billion.
- Skills development levy:
Skills development levy holiday: From 1 May 2020, there will be a four-month holiday for skills development levy contributions (1 percent of total salaries) to assist all businesses with cash flow. This provides relief of around R6 billion.
See Treasury and SARS Explanatory Notes on Tax Measures.
- Corporate Income Tax:
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 percent of earnings; and (ii) limiting the use of assessed losses carried forward to 80 percent 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.
- Carbon Tax:
Three-month deferral for filing and first payment of carbon tax liabilities: The filing requirement and the first carbon tax payment 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, providing cash flow relief of close to R2 billion.
See Treasury and SARS's Explanatory Notes on Tax Measures.
Case-by-case application to SARS for waiving of penalties: Larger businesses (with a gross income 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 a gross income of less than R100 million can apply for an additional deferral of payments without incurring penalties.
How to apply for the waiving of penalties for tax debt:
Larger businesses (with a gross income of more than R100 million) that are incapable of making payment due to the COVID-19 disaster, may apply to defer tax payments without incurring penalties by emailing us on COVID19IPAaboveR100m@sars.gov.za.
Similarly, businesses with a gross income of less than R100 million can apply for an additional deferral of payments without incurring penalties by emailing us on COVID19IPAbelowR100m@sars.gov.za.
For more information on the requirements and documents to include in the application, see the How do I query my debt webpage.
See Treasury and SARS's Explanatory Notes on Tax Measures.
- Expanding access to Living Annuity Funds:
In order to assist individuals who either need cash flow immediately or who do not want to be forced to realise living annuity investments that have underperformed, Government proposes amending GN290, Government Gazette 32005 of 11 March 2009 by expanding access to living annuities for a limited period of four months, beginning 1 May 2020 and ending on 31 August 2020 as follows:
Allowing individuals who receive funds from a living annuity to temporarily immediately either increase (up to a maximum of 20 percent from 17.5 percent) or decrease (down to a minimum of 0.5 percent from 2.5 percent) the proportion they receive as annuity income, instead of waiting up to one year until their next contract anniversary date.
Allowing individuals to adjust their drawdown rates at any time during this period (irrespective of whether or not the contacts¡¦ anniversary date falls within the said period);
Any elections made during this period will only be applicable for the above mentioned four-month period. The lapsing of this period will result in the drawdown rates automatically reverting to the rates applicable before said election.
In addition, Government proposes to amend GN1164, Government Gazette 31554 of 30 October 2008 as follows:
The R50 000, which is the minimum value of the annuity or part of the retirement interest which an individual can withdraw in the event that there was any previous lump sum commutation in the fund and R75 000 in any other case be replaced by a single threshold of R125 000 to be applied as the de-minimis amount. The proposed amendments to the de-minimis amounts to R125 000 will not be limited to the four-month period and will continue to apply thereafter.
- Increasing the deduction available for donations made to Solidarity Fund:
To alleviate the cashflow difficulties of employees where their employers contribute to the Solidarity Fund on their behalf, Government is proposing a special relief measure by temporarily increasing the current 5 percent tax limit in the calculation of monthly PAYE of the employee. An additional limit of up to a maximum of 33.3 percent for three months or 16.66% for six months, depending on an employee’s circumstances, will be available.
This will ensure that the employee gets the deduction that is in excess of 5 percent much earlier than under normal circumstances and will therefore not have to wait until final assessment to claim a potential refund, provided the donation is made to the Solidarity Fund. It is, however, important to note that a final determination must still be made upon assessment as the employee may have other income, deductions, or losses that impact the final taxable income before the deduction of donations.
- Adjusting PAYE for donations made through the Employer to the Solidarity Fund:
In order to encourage South Africans to make contributions to the Solidarity Fund in line with the President’s call to action, it is proposed that the tax-deductible limit for donations, currently 10 percent of taxable income, be increased to 20 percent in respect of donations in cash or of property in kind donated and actually paid or transferred to the Solidarity Fund at the end of the year of assessment of the donor to the Solidarity Fund during the 2020/21 tax year. There will, thus, be a limit of 10 percent for any qualifying donations (including donations to the Solidarity Fund in excess of its specific limit) and an additional 10 percent for donations to the Solidarity Fund.
The 20 per cent tax-deductible limit for donations will apply only to donations made during the 2020/2021 tax year. Any donations over the limit made during the 2020/2021 tax year will be carried forward and deemed to be a donation made in the succeeding year of assessment (2021/2022) and be subject to the 10 per cent limitation in that year.
Disclaimer * This article was originally presented by Lettie Janse van Vuuren CA(SA0 as part of the Compliance and Legislation Updates.