South Africa Plans Tax Relief To Boost Economy Amid Virus

By Alex M. Parker
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Law360 (May 1, 2020, 8:19 PM EDT) -- South Africa unveiled draft legislation Friday for 70 billion rand ($3.7 billion) in tax relief to mitigate the economic downturn caused by the COVID-19 pandemic, including incentives for citizens and corporations to donate to a government response fund.

The legislation, initially announced April 23, is part of an overall 500-billion-rand package of economic support measures by the National Treasury, which the South African government said is only the first of a three-phase plan to move the country's economy past the pandemic.

In March the government announced the creation of the Solidarity Fund, an independent organization to work with public health officials on the response to the pandemic. The legislation would raise the tax-deductible limit for donations to 20% of taxable income and would allow employees to donate up to 5% of their salary tax-free through their employers.

The legislation would allow companies to file for value-added tax refunds monthly, rather than every two months, and would give them a three-month deferral on the alcohol excise tax as well as the country's new carbon tax, which was set to go into effect in July. The country is also delaying until 2022 new restrictions on net interest deductions and net loss carryforwards that would have gone into effect next year. Companies will be able to defer up to 35% of their employees' tax liabilities until July 31 under the bill.

The second phase of the government's response plan would focus on economic recovery, according to a 16-page outline released by the National Treasury on Thursday.

"This will require emphasis on measures to support employment and investment," the government said. "Far-reaching structural reforms will also be necessary, focused on measures that help to lower the cost of doing business and living."

In a third phase, according to the outline, the country would look to pivot its economy to thrive after the pandemic has subsided, recovering not only from its economic effects but also from a decade of "weak growth." The government said it would address structural issues such as inequality and "the uneven quality of public services."

Details of the plans will be released in further legislation, the outline said.

The National Treasury said it would accept public comments on the legislation until May 15.

The department did not return requests for comment.

--Editing by Neil Cohen.

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