More tax breaks inbound: SA introduces second set of relief measures

When it rains, it pours. South Africans learned on Tuesday evening that a wave of tax breaks and deferrals would be introduced to help citizens cope with the financial implications of lockdown. However, little over 36 hours later, the National Treasury went and expanded on the measures.

Tax and Financial Sector Policy DDG, Mr Ismail Momoniat says during a virtual meeting of the Joint Standing and Select Committees on Finance: With these tax measures, we aim to help businesses and households with their liquidity over the next few months amid Covid-19. #Covid19SA

— National Treasury (@TreasuryRSA) April 23, 2020

Cometh the hour, cometh the Treasury

With general incomes and business revenue decimated by the global health crisis and subsequent lockdown, the government have stepped in to cushion the blow. Around 10% of South Africa’s GDP will go towards alleviating the gloom, as our already-clapped economy enters into its darkest hour.

On Thursday, an official statement was released by the Treasury: Their updated list of interventions includes the deferral of tax on several huge industries, and there’s good news for our lower working class citizens.

New tax breaks introduced by the Treasury

Increased wage subsidies for low earners

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.

Double your tax deductible Solidarity Fund donations in 2021

The tax-deductible limit for donations (currently 10% of taxable income) will be increased by an additional 10% for donations to the Solidarity Fund during the 2020/21 tax year.

Taxes on booze and cigarettes relaxed

A 90-day deferral for alcohol and tobacco excise duty due to be paid in May and June. This is expected to provide short term assistance of around R6 billion

Prioritising VAT refunds for those who need it most

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 cashflow

Carbon tax deferral

The filing requirement and the first carbon tax payment will be delayed by three months to 31 October 2020, providing cash flow relief of close to R2 billion.

Changes to corporation tax pushed back by a year

The 2020 Budget announced measures to broaden the corporate income tax base by restricting net interest expense deductions to 30% of earnings and limiting the use of assessed losses carried forward to 80% of taxable income. These measures will be postponed to at least 1 January 2022.

It’s raining tax breaks – and we need them dearly

These measures have been added to the eight interventions Cyril Ramaphosa shared with the nation earlier this week. Amongst the highlights are PAYE adjustments and new ways to seek tax deferrals.

• There will be a four-month tax holiday for companies’ skills development levy contributions.
• All VAT refunds will be fast-tracked.
• A three-month delay for filing and first payment of carbon tax has been implemented.
• The proportion of PAYE payments that can be deferred will be increased to 35%.
• The previous turnover threshold for tax deferrals is being increased to R100 million a year.
• Businesses with a turnover of more than R100 million a year can apply directly to SARS on a case-by-case basis for deferrals of their tax payments.
• Taxpayers who donate to the Solidarity Fund will be able to claim up to an additional 10% as a deduction from their taxable income.
• These tax measures should provide at least R70 billion in cash flow relief or direct payments to businesses and individuals.