Following announcement of the actions taken by government to combat the COVID-19 crisis, South Africans are by now well aware of the proposed tax measures effective from 1 April 2020.
An additional fiscal measure under the Value-Added Tax Act No. 89 of 1991 has been implemented as a means of VAT relief.
When the Regulations under the Disaster Management Act No. 57 of 2002 were published on 25 March 2020, it made provision for this exemption by providing for the definition of “essential goods”, which include:
Food – Any food product, including non -alcoholic beverages; animal food; and chemicals, packaging and ancillary products used in the production of any food product.
Cleaning and hygiene products – Toilet paper, sanitary pads, sanitary tampons, condoms; hand sanitiser, disinfectants, soap, alcohol for industrial use, household cleaning products, and personal protective equipment; and chemicals, packaging and ancillary products used in the production of these items.
Medical – Medical and hospital supplies, equipment and personal protective equipment; and chemicals, packaging and ancillary products used in the production of any of the above.
Fuel – including coal and gas.
Basic goods – including airtime and electricity.
SARS announced on 27 March 2020 that items falling within this definition will fall under Item 412.11 of Schedule 1 to the VAT Act. Schedule 1 must be read with section 13(3) of the VAT Act, which provides for the exemption.
There is a full rebate of customs duty in terms of item 412.11 of Schedule 4 of the Customs and Excise Act No. 94 of 1964 in effect too and will assist with the importation of essential goods and provide relief for vendors who would not be required to pay input VAT to SARS.
Before businesses plan to import these goods you will need to obtain a certificate from the International Trade Administration Commission and may be subject to any further conditions agreed to by the Governments of the South Africa, Botswana, Lesotho and Swaziland. There may however be some administrative challenges in obtaining the certificate as some departments may be operating at reduced-staff levels.
The South African government implemented several swift measures to assist with various economic forms of relief to businesses and private individuals and has taken in to account measures implemented by other countries around the world. Any relief measures must be meaningful and remain unencumbered by bureaucratic red-tape to assist the failing economic situation South Africans find themselves in.
The Organisation for Economic Cooperation and Development (OECD) recently warned that virus outbreak has plunged the world economy into its worst downturn since the global financial crisis. Growth in the world economy will be half what had been expected (initially projected at 2.4%) according to the OECD and is the worst growth since 2009. If the outbreak worsens in Asia, Europe and North America global growth could drop to as as low as 1.5% and much lower in the remaining economic zones. The OECD provides summaries of relief measures imposed by countries across the globe.
No matter the relief measure implemented by any private individual or business it should be done with due care and regard for tax compliance therefore it is essential that tax advice be sought as soon as possible.
For those interested in information about relief measures per country, a summary may be found on here.
OECD’s regularly updates their info page about the economic impact of COVID-19 is available on www.oecd.org/coronavirus/en/
Author Craig Tonkin