South African president Cyril Ramaphosa has announced further tax measures to assist businesses and their employees through the difficult Covid-19 period. The additional tax relief measures include the fast-tracking of VAT refunds to help with cash flows, a four-month holiday for company skills development levy contributions and a three-month delay for the filing and first payment of carbon tax.
“The catch, however, is that taxpayers who take advantage of this relief are required to pay the deferred amounts to SARS over a period of six months starting from 1 August. This means that the first payment would need to be made by 7 September with the employees’ tax filing for August.
“As such, this relief measure is seen as more of an “interest free loan” to help alleviate the cash flow issues many businesses are facing during this time. It is unfortunately not cash in your pocket since, as is the case with any loan, it needs to be repaid,” noted Jana Botha, tax consultant at Baker McKenzie Johannesburg.
Here Is All You Need To Know
- Taxpayers who donate to the Solidarity Fund, set up to aid vulnerable South Africans, support initiatives that are set in place to contain the spread of Covid-19 in South Africa and drive the solidarity campaign, will also now be able to claim up to an additional 10% as a deduction from their taxable income, Botha said.
- The president noted that in order to assist a greater number of businesses during the Covid-19 statutory lockdown, the previous turnover threshold for tax deferrals would be increased.
- The aim of the deferral of employees’ tax and provisional tax payments is to alleviate the cash flow burden in the short term so that businesses can pay their staff and suppliers, said Botha.
- Tax compliant Small, Medium and Micro Enterprises (SMMEs) with a turnover of up to R100 million, (where it was previously R50 million) can now defer 35% (previously 20%) of their employees’ tax payment for the months of April to July without incurring penalties and interest.
- Further, tax compliant businesses with a turnover of more than R100 million will be able to apply to SARS to defer their employees’ tax and provisional tax obligations and this will be assessed on a case-by-case basis, Botha said.
- The real relief is that businesses will not incur penalty and interest charges should they take advantage of the deferral, Botha said.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.