SOUTH AFRICA: COVID-19 VAT IMPLICATIONS

Jul 8, 2020 | COVID-19

SOUTH AFRICA – Update 7th July

COVID-19 and the 2020 Supplementary Budget: measures include the fast-tracking of VAT refunds for smaller businesses

It has been acknowledged by Government that the COVID-19 pandemic has had a significant impact on the South African economy, especially as a result of the far-reaching lockdown measures that have been implemented in order to contain the spread of the coronavirus. Compliance by businesses and households with the lockdown measures has resulted in a loss expected to provide around R70 billion in support to the South African economy, either by way of reducing taxes otherwise payable or by deferring tax payments.

The measures are generally split between those that provide additional liquidity (in effect, interest free loans) that are ultimately paid back to Government, and those that provide additional subsidies and result in lower tax revenue.

The measures include the following:

Skills development levy holiday

From 1 May 2020, there is a four-month holiday for skills development levy contributions (one per cent of total salaries) to assist all businesses with cashflow. This provides relief of around R6 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. It is anticipated that this will unlock the input tax refund faster and therefore immediately assist with cashflow. 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 first carbon tax payment, together with filing of the first carbon tax return, are due by 31 July 2020. In order to provide additional time to complete the first return as well as short-term cashflow relief, 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.

It is anticipated that this will provide cashflow relief of approximately R2 billion. Deferral of 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 and June 2020 are 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.

Expanded employment tax incentive Firstly, the amount of the Employment Tax Incentive (‘ETI’) claimable for the four-month period from 1 April to 31 July 2020 will be increased by an amount of up to R750 per month for private sector employees earning below R6,500 under the ETI.

Secondly, a monthly ETI claim in the amount of up to R750 will be available during this four-month period for employees:

  • from the age of 18 to 29 who are no longer eligible for the ETI on the basis that the employer has already claimed the ETI in respect of those employees for 24 months; and
  • from the age of 30 to 65 who are not eligible for the ETI due to their age. Lastly, in order to get cash into the hands of compliant employers, SARS will, as soon as possible, accelerate the payment of employment tax incentive reimbursements from twice a year to monthly.

It must be noted that the current compliance requirements for employers under sections 8 and 10(4) of the Employment Tax Incentive Act, 2013, will continue to apply. This measure is expected to provide assistance totalling approximately R15 billion.

 

Source Credit – pwc

 

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