The National Treasury and the South African Revenue Service (SARS) published draft tax bills on the 28th of July for public comment, comments are due by the 28th of August 2021. These draft tax bills contain tax proposals made in the 2021 Budget and will be introduced in Parliament later this year.
Some notable changes in each bill that relate to Customs and Excise, Tax Incentives and Government Grants are set out below:
1. Rates and Monetary Amounts and Amendment of Revenue Laws Bill
- The Carbon Tax Rate - increase from R127 to R134 for the 2021 calendar year.
- Excise Duty Rate - increases on alcohol and tobacco as proposed in the Budget
- Changes to tariff structure and rebate items on reconstituted tobacco products from Switzerland - the purpose of the change is to recognize new smoking products available in the South African market and to ensure that the structure covers new generation tobacco products.
2. Taxation Laws Amendment Bill
- Urban Development Zone incentive – sunset date extended by another two years to 31 March 2023
- S12H – Learnership incentive – sunset date extended by two years to 1 April 2024
- S12I – Industrial Policy Projects incentive
(a) Companies currently have four years to bring 50% of assets into use (and could extend by one year to five years). Amendments proposing to allow for an extension to six years.
(b) Compliance period to be extended by two years (i.e., from three to five years) if companies can show that non-compliance was due to challenges as a result of COVID-19.
- Employment Tax Incentive - definition of an employee updated to curb abuse.
- 11th schedule which lists all tax-exempt grants has been updated to include additional grants– e.g., The COVID-19 Emergency Fund from the Department of Small Business Development.
- Carbon Tax Act
(a) The renewable energy premium formula adjusted for error (it didn’t have the rate included).
(b) The definition of “sequestration” to be amended and to ensure no double-dipping:
1. To explain at a high level – in some cases the emissions reported to the Department of Environment may have already deducted sequestered emissions (for example emissions taken up by forests and plantations).
2. The change in the definition is to ensure that if the sequestered emissions are already deducted, they must not be deducted again when determining the tax liability.
(c) . Carbon budget allowance – it has been made clear that this allowance is linked to the period 1 January 2021 to 31 December 2022 and not the tax period.
(d) Various changes to Schedule 2 and IPCC codes – to align the Carbon Tax Act to GHG reporting regulations with effect from 11 Sept 2020.
3. Taxation Administration Laws Amendment Bill
- Admin changes to Customs and Excise Act – clarification that “Trade and Industry” must be read as a reference to “Trade, Industry and Competition”.
- S6 – expand the purposes for which air cargo may be removed to de-grouping depots to include consolidation and removal to transit sheds for export.
- S38A – changes to allow accredited companies to supply goods to foreign going ships and aircraft.
- S47- admin changes to under-payments of duties – i.e., do not have to account for under-payments of duties that are less than R100 (an increase from 50 cents to R100).
- S75 – changes to allow SARS to investigate the validity of diesel refund claims (to extend to wet contractors i.e., where the contractor obtains the diesel itself).
- S76 – the minimum refund increased from 50 cents to R100 to ease the administrative burden on SARS.
4. Emergency Tax Measures in Response to the COVID-19 Pandemic and Recent Unrest
- Employment Tax Incentive – expansion of the incentive including an increase of R750 to the monthly amount allowable, applicable from 1 August 2021 to 30 November 2021.
- PAYE deferral – 35% can be deferred for August to October 2021, applicable to companies with turnover less than R100m i.e., companies will pay from 7 December 2021.
- Deferral of excise duties on alcohol – SARS will provide deferrals of up to three months by tax compliance licensees, but an application is required setting out the circumstances justifying a deferral.
Cova Advisory