Covid-19 Tax Legislation Update

• South Africa

• Tax planning and consultancy

04-05-2020

With the continued economic impact of the Covid-19, amendments and updates were published on 1 May 2020 to address various tax relief measures that are available to qualifying taxpayers. The initial measures contained in the draft Disaster Management Tax Relief legislation covered proposals relating to, amongst others, deferrals of provisional and employees’ tax and the expansion of the employment tax incentive.

The draft legislation has been expanded now to cover the increase in the various allowances and deferrals offered to cover the payment of excise duties on alcohol and tobacco and the carbon tax.

Significantly, the legislative provisions now provide for:

• In relation to the Employment Tax Incentive amount, the amount of R500 per month for each employee that earns less than R6 500 per month will be increased to R750 per month for a limited period of four months starting from 1 April 2020 and ending 31 July 2020.

• In calculating what constitutes “gross income” for purposes of determining the thresholds relating to the small business relief, it was originally proposed that this should not include more than 10% of income derived from interest, dividends, foreign dividends, rental from letting fixed property and any remuneration received from an employer. This is now increased to 20%.

• The annual turnover (i.e. gross income) limit for tax compliant small or medium sized businesses is increased from R50 million to R100 million.

• Importantly, there is a proposal of a four-month holiday (non-payment) for skills development levy contributions (1% of monthly payroll) made by employers, beginning 1 May 2020 and ending on 31 August 2020. This is a suspension, not a deferral, as a result, employers will not become liable for these amounts after 31 August 2020. This applies to every registered employer liable to pay skills development levy.

• Access to living annuities for a limited period of four months, beginning 1 May 2020 and ending on 31 August 2020 will be expanded.

• There is a proposal to temporarily permit vendors to file their returns monthly, while remaining under Category A or B. This is important for smaller businesses and will facilitate VAT refunds.

• In order to minimise cashflow difficulties for the manufacturers of alcoholic beverages and tobacco products, it is proposed that the manufacturers in these industries continue to submit their excise duty accounts on time but that the payments due to SARS be deferred for a period of 90 days without incurring interest or penalties.

• There is a proposal for a three-month deferral of the first period for submission of accounts and carbon tax payments.

In addition to the above substantive changes made to the tax legislation, there are also changes which have a procedural impact on taxpayers. For example, some taxpayers have queried whether the usual time periods as prescribed continue to apply in relation to submission of documents to SARS in the context of a dispute. The Tax Administration Act contains several instances where there are prescribed periods within which the taxpayer must perform. Usually, there is an exemption over the Christmas period each year and when counting days for performance, this period is excluded from the calculation as dies non. Clarity has now been provided that during the national lockdown commencing from 26 March 2020, there will be a similar suspension in the counting of time periods for certain prescribed categories, such as the physical provision of documents and appearances. In addition, the time periods are suspended in relation to disputes with SARS. If a taxpayer does not fall within one of the identified categories where the time periods are suspended, then there is a further mechanism for the taxpayer to apply for condonation.

Practically, taxpayers should not automatically assume that the time periods will no longer apply during lockdown and should make sure that they do not fall foul of their tax obligations. SARS continues to operate and the collection of revenue from taxpayers will be especially important in the current economic circumstances.