Never mind holding onto their breath, South Africans have been holding onto their wallets in anticipation of the South African 2022 budget speech which was delivered for the first time by Minister Enoch Godongwana on 23 February 2022. There was certainly a sigh of relief across the country and even applause in parliament when Minister Godongwana said “Now is not the time to increase taxes” and “we have decided to keep money in the pockets of South Africans”.

The Minister’s decision will be welcomed by many South Africans as the 2022/23 budget includes a whopping R5,2 billion in tax relief to support economic recovery as a result of the seemingly indefatigable COVID-19 pandemic.

The decision included the personal income tax and medical tax credits being adjusted for an inflation rate of 4,5 percent for the 2022/23 financial year. This means that a South African individual under the age of 65 can earn up to R91 250 tax-free annually.

Fill up your tanks and plan those road trips, as for the first time since 1990, the fuel levy on petrol and diesel will not increase for 2022/23, and nor will the Road Accident Fund Levy. In addition, the Minister of Finance and Minister of Mineral Resources agreed to review all aspects of the fuel price which puts pressure on the cost of transport and most importantly food and other essential services. Watch this space.

As always, good things must come to an end, as the Minister announced excise duties on alcohol and tobacco (the so-called ‘sin taxes’) will increase by between 4,5 and 6,5 percent.  Many expected no increases given the challenges the SA alcohol industry has faced during the past two years due to the notorious South African lock-down regulations and prohibition-style alcohol bans. And if you thought that vaping would be the next best option from ordinary cigarettes, think again, as the Minister has announced a new tax on vape products to be introduced in January 2023.

For those saying Bon Voyage South Africa, there is a proposal to clarify the sections of the Income Tax Act which deal with the interest exemption and capital gains annual exclusion of R40 000. This clarification is to ensure that South African emigrants will only claim the exemption and exclusion once in their split year of assessment in the year of emigration.

There will also be more focus on high net worth individuals to assist with the detection of non-compliance or fraud through the existence of unexplained wealth. Specifically, it was announced that all provisional taxpayers with assets exceeding R50 million will be required to declare their assets and liabilities at market value. We can thank the new SARS High Net Worth unit for this.

One of the most interesting developments is that the corporate tax regime will be restructured in an effort to “create a conducive environment for businesses to grow, increase investment and employ more people”. One of those changes includes the reduction of the corporate tax rate from 28 percent to 27 percent for companies with years of assessment ending on or after 31 March 2023 as announced in the 2021/22 budget.

But don’t count those chickens just yet, as the reduction in the corporate tax rate will be coupled with measures to increase in the tax base (most likely more businesses required to register for tax), the dreaded implementation of the restriction of assessed losses to 80 percent of taxable income and the interest limitation on the deduction of interest on debts where such interest is not subject to tax in South Africa.

Lastly, in South Africa’s bid to save the planet, it is proposed that the plastic bag levy be increased from 25c per bag to 28c per bag. Now…if only they could find a way to remind us to not forget our reusable bags!

We will be keeping an eye on all the proposed changes and their related commentary and send out Newsletters on any updated topics. In the meantime, if you have any queries about these changes and their potential effect on you and your business, please don’t hesitate to contact us!

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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.

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