By Joseph Boris

Law360 (April 23, 2020, 3:51 PM EDT) -- South Africa's government introduced legislation Thursday to provide 70 billion rand ($3.7 billion) in tax deductions, deferrals and refunds in a new economic support plan for individuals and businesses affected by the coronavirus pandemic.

The National Treasury on its website announced details of the package that President Cyril Ramaphosa had outlined in a speech Tuesday. The relief measures expand and extend pandemic-mitigation plans the Treasury presented April 1 under the first version of the Disaster Management Tax Relief Administration Bill.

Since then, economic conditions have worsened, the Treasury said, noting that it and the South African Revenue Service had received numerous requests for aid, including from large businesses with substantial cash-flow difficulties.

The Treasury said it "recognizes that the short-term interventions announced in the first fiscal package do not go far enough in assisting businesses or households through the crisis — especially as the lockdown has since been extended." Its statement described "a critical need for government interventions to assist with job retention and support businesses that may be experiencing significant distress."

In his speech, Ramaphosa had said that although the lockdown was having "a devastating effect on our economy, it is nothing compared to the catastrophic human, social and economic cost if the coronavirus could spread among our people unchecked."

The latest measures will refund value-added tax payments; give employers a four-month holiday, starting May 1, from the country's skills-development levy; and postpone the deadline for filing and payment of the phase-one carbon tax by three months, to Oct. 31.

According to the new draft legislation, the government also will double the revenue threshold for businesses to be eligible for deferral of their pay-as-you-earn obligations, while payment of excise duties on alcohol and tobacco will be deferred by 90 days.

The bill also would allow small VAT vendors that are poised to receive a net refund to expedite payments by temporarily filing monthly, instead of every two months.

Also called for is an even bigger expansion of South Africa's employment tax incentive. Employers would be eligible for a monthly wage subsidy of up to 750 rand for each worker earning less than 6,500 rand a month, at a total cost of 15 billion rand. The initial set of tax measures provided for a subsidy of up to 500 rand per month for each low-wage employee.

Under the new proposed legislation, the proportion of taxes to be deferred would increase, along with the gross income threshold for automatic tax deferrals. Tax-compliant businesses would be allowed to defer 35% of their employees' tax liabilities through July 31 — up from 20% in the first set of tax measures — and a portion of their provisional corporate income tax payments, without penalties or interest.

The gross income threshold for both types of deferral would increase to 100 million rand from 50 million rand, providing total cash-flow relief of about 31 billion rand with an expected revenue loss of 5 billion rand.

The National Treasury also said the bill would let the SARS field case-by-case applications to waive tax penalties. Larger businesses — those with gross income of over 100 million rand — that can show they're unable to make payments due to the pandemic may apply directly to SARS to defer payments without incurring penalties. Similarly, businesses with gross income under 100 million rand could apply for no-penalty payment deferrals beyond what the revenue agency has already been authorized to provide.

The government plans to postpone some of its 2020 budget provisions to January 2022, including a restriction of net interest expense deductions to 30% of earnings, and a limit on the use of assessed losses carried forward to 80% of taxable income. Both measures were to have been effective for assessment years starting on or after Jan. 1, 2021.

As of Thursday, South Africa's public health authorities had reported 3,635 confirmed cases, including 65 deaths, of COVID-19, the respiratory disease caused by the novel coronavirus.

Ramaphosa's government has drawn praise for its handling of the outbreak, despite having Africa's second-highest incidence of COVID-19, behind Egypt. On Wednesday, Michael Ryan, executive director of the World Health Organization's health emergencies program, told an online news conference that South Africa's strategy pointed clearly to adequate preparedness by the government.

--Editing by Vincent Sherry.

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