Highlights from the SA Budget announced on 26 February 2020
Here follow the SA Budget highlights announced on the 26th of February 2020. To find out how we can assist your business, send us a mail or give us a call!
- The exchange control system will be reformed over the next 12 months so that all foreign currency transactions will be permitted subject to a specific list of exceptions.
- With effect from 1 March 2021, the concept of “financial emigration”, facilitated in the past through the South African Reserve Bank, will be phased out and the same restrictions/checks will apply to individuals who emigrate from South Africa or remain resident.
- Loop structures will no longer be prohibited by exchange control rules.
Personal income tax
- The personal income tax brackets have been adjusted for inflation e.g. 45% maximum tax rate for taxable income in excess of R1 577 301 (up from R1 500 0000).
- Rebates have also been adjusted upwards resulting in the tax-free threshold increasing to R83 100 (up from R79 000) per year for individuals under 65.
- Medical scheme tax credits (i.e. a rebate for contributions made to medical aid schemes) increases to R319 (up from R310) for the first 2 persons covered by the scheme and R215 (up from R209) for each additional dependent.
- Allowable Annual contributions to tax-free savings accounts are increased to R36 000 (up from R33 000).
- From 1 March 2020, South African tax residents who spend more than 183 days in employment outside South Africa (of which 60 days are consecutive), will be taxed on employment income earned above R1.25 million (up from R1 million).
- Anti-avoidance provisions limiting the transfer of assets to trusts/ companies owned by trusts will be strengthened to cover preference share funding structures
- Reforms will be introduced to automate the Employees Tax system which could reduce the filing obligations for taxpayers earning a salary
- SARS will be permitted to refuse to pay employees tax refunds until a taxpayer furnishes any outstanding returns.
Corporate tax, Dividends Tax and Capital Gains Tax (CGT)
- Corporate tax rate (currently 28%) will be decreased soon.
- Current tax incentives, including those relating to Special Economic Zones, Venture Capital Companies and Mining Capital Expenditure, will be reviewed and, in some cases, limited or discontinued.
- From 1 January 2021, assessed losses will only be permitted to offset 80% of taxable income (down from 100%).
- Interest deductions on cross-border loans will be limited to 30% (down from 43%) of Tax EBITDA (Earnings before Interest, imputed controlled foreign company (CFC) income and capital allowances are taken into account) and carry- forward of this interest deduction will be limited to five years.
- South African dividends received by a CFC of a South African individual or trust will be subject to 20% dividends tax.
- Transfer pricing rules will be amended to address transactions between CFC’s and non-resident connected persons.
- Various amendments to the tax treatment of doubtful debts will be introduced.
- Real Estate Investment Trusts will also be subject to tax changes.
- Anti-avoidance provisions relating to securities lending arrangements will be strengthened to cover interpositions of tax-exempt parties.
- Participation exemptions from Dividends Tax and CGT available to South African taxpayers who hold certain shareholdings in foreign companies will be denied if the value of those shares is attributable to South African assets.
- As from 1 March 2020, brackets to calculate transfer duties are adjusted e.g. no transfer duty on property valued up to R1 million (up from R900 000).
Customs and Excise duties
- From 1 April 2020, Fuel levies increase by 16c and Road Accident Fund Levy increase by 9c.
- Levies on various alcohol and cigarette products increase.
- From 2021, taxes will be introduced on electronic cigarettes.
- Export taxes on scrap metal will be introduced.
- From 1 April 2020, plastic Bag levy will increase to 25c per bag.
- Carbon tax on carbon emissions will increase to R127 per ton
- Levy on incandescent light bulbs will increase.
Value- Added Tax (VAT)
- VAT relief granted on corporate restructuring transactions is to be reviewed.
- Changes to how intermediaries account for VAT on electronic services will be introduced.
Thank you for reading our blog post on the SA Budget highlights. To find out how we can assist your business with these changes to the SA budget announcements, send us a mail or give us a call!
How can we help?
How you structure your business is a critical question as you expand globally. The right structure will protect your assets, improve your currency position, support your business operations, facilitate future business expansion and changes, and optimise your overall tax rate. Trying to unscramble a sub-optimal structure entered into in haste or without full consideration of relevant facts is complex and expensive, so it’s important to plan upfront.
Structuring an international business is both a science and an art – this is our specialist area of expertise. Regan van Rooy is an international tax and structuring advisory firm focussing on Africa. We have offices in South Africa, Mauritius and Ireland and we can help you with any international tax or structuring query.