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South Africa Announces $3.7 Billion in COVID-19 Tax Relief

Posted on Apr. 23, 2020

South African President Cyril Ramaphosa has announced ZAR 70 billion (about $3.7 billion) in tax deductions, deferrals, and refunds as part of a new, three-phase economic support package for taxpayers affected by the coronavirus pandemic.

Ramaphosa issued a statement April 21 announcing expanded tax relief measures that prioritize VAT refunds, give companies a four-month holiday from the skills development levy, and postpone the deadline for filing and payment of the phase 1 carbon tax by three months. The government also doubled the turnover threshold for businesses to be eligible for deferral of their Pay As You Earn liabilities.

In a March 23 statement, Ramaphosa had said that businesses making less than ZAR 50 million annually could defer 20 percent of their Pay As You Earn liability without interest or penalties for six months — a concession that was expected to help nearly 75,000 small and medium-size enterprises. Under the expanded aid package, businesses making up to ZAR 100 million can defer 35 percent of the Pay As You Earn tax owed. Businesses that exceed that limit can apply to the South African Revenue Service for a similar deferral. Also, penalties for late payments will not be applied if a business can show that it has been materially affected by the coronavirus pandemic.

Further, individuals who donate to the country's Solidarity Fund, which is operated by an independent board, will be able to claim a 10 percent deduction from their taxable income, Ramaphosa said. The Ministry of Finance will provide additional details about that measure and others, he added.

The news garnered support by many in the country’s business sector. During a recent radio interviewKganki Matabane, CEO of South Africa's Black Business Council, said Ramaphosa’s announcement showed “bold leadership,” and that the council endorses the government’s economic relief plan.

In an interview with TV station eNCA April 21, Busi Mavuso, CEO of Business Leadership South Africa, also applauded the expanded relief measures. “At the center of the stimulus package, you will see that the intention is to ensure that we save jobs and we therefore put money in people's hands, because if you don't have disposable income, then unfortunately you are actually affecting the circular flow of income in the economy," Mavuso said. “I must actually commend [the] government on their decisiveness on the forward-looking response in terms of trying to assist in this difficult time in our country.”

On April 1 the National Treasury published draft tax relief measures that would apply through July 31 for employers and workers affected by the coronavirus crisis. The same day, the Revenue Service announced that first-quarter revenue collections were ZAR 66.3 billion short of original projections.

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