Despite all the interest provoked by the meeting between Presidents Ramaphosa and Trump, the South African Budget Speech 3.0, delivered on 21 May 2025 by Finance Minister Enoch Godongwana, came with very few surprises.
The main new tax measure introduced was an increase in the fuel levy, the first adjustment in three years, which was broadly anticipated following the decision not to proceed with a VAT rate increase. Additionally, the previously proposed expansion of the zero-rated food basket has been withdrawn.
The Minister reaffirmed several prior announcements, most notably that the VAT rate will remain at 15%, with no increase currently planned. A range of other measures outlined in the second version of the Budget Speech, as detailed in our newsletter South Africa’s 2025 Budget: Key Tax Proposals, have also been confirmed and the legislative process to formally implement them is now underway.
No changes were announced to key proposals introduced through the previous Budget Speech, which included:
- No adjustment to personal income tax brackets: personal income tax brackets, rebates and medical tax credits remain unchanged, leading to fiscal drag, where inflation-driven salary increases push individuals into higher tax brackets. This measure raises R31.5 billion over the medium term but reduces disposable income and has been criticised for increasing the tax burden on households.
- Adjustment to transfer duty thresholds: to account for inflation, transfer duty thresholds will increase by 10%. No transfer duty will apply to properties under R1 210 000 (up from R1 100 000), although tax rates remain unchanged.
- Changes to the employment tax incentive: while the incentive values (R1 500 for the first year, R750 for the second) remain, adjustments effective April 1, 2025, will revise qualifying income bands and the formula to align with updated minimum wages. The incentive phases out at R7 500 (up from R6 500) and special provisions apply to exempted wage categories.
- Extension of the urban development zone incentive: the tax incentive aimed at reviving inner-city areas will be extended for a five-year period to March 31, 2030, to provide investment certainty and allow further engagement with municipalities.
- Review of the renewable energy allowance: following the expiry of the temporary 2023 renewable energy incentive, the government proposed to retain the original framework’s 1MW threshold and leasing rules, indicating no changes after review.
- Cross-border retirement fund taxation: amendments are proposed to address double non-taxation risks by removing certain exemptions for South African residents receiving foreign retirement income, with implementation planned during the current legislative cycle.
- Excise duties on alcohol and tobacco: above-inflation increases in excise duties are proposed for alcoholic beverages and tobacco-related products.
Ultimately, Budget Speech 3.0 was more about ticking boxes than turning heads, leaving big shifts for another day. If you’d like to chat about how any of this affects your business, get in touch.
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