In a bit of a turnaround the Finance Minister delivered a budget with very little in the way of tax changes and more importantly no increase in VAT or income tax rates.
Tax changes in the budget include (source treasury.gov.za):
- Given the weak economic outlook, government will not raise additional revenue from tax proposals in 2020/21
- Tax revenue is projected to grow by 4.9 per cent in 2020/21
- The main tax proposals include:
- Providing personal income tax relief through an above inflation increase in the brackets (5.2% vs inflation of 4.2%) and rebates
- Increasing medical aid tax credits from R310 to R319 for the first two beneficiaries and from R209 to R215 per month for the remaining beneficiaries
- Further limiting corporate interest deductions to combat base erosion and profit shifting
- Restricting the ability of companies to fully offset assessed losses from previous years against taxable income.
- Increasing the fuel levy by 25c/litre, consisting of a 16c/litre increase in the general fuel levy and a 9c/litre increase in the RAF levy, to adjust for inflation
- Increasing the annual contribution limit to tax-free savings accounts by R3 000 from 1 March 2020.
- Increasing excise duties on alcohol and tobacco by between 4.4 and 7.5 per cent
- Increasing the brackets for transfer duty by inflation (transfer duty on residential properties will now start for properties over R1mn)
- Government will increase the cap on the exemption of foreign remuneration earned by South African tax residents to R1.25 million per year from 1 March 2020. Some advisors have recommended emigration, as recognised by the Reserve Bank, as a way to break tax residency. However, this is only one factor considered by SARS. Government wants to encourage all South Africans working abroad to maintain their ties to the country. Consequently, this concept of emigration will be phased out by 1 March 2021.
- The revitalisation of the South African Revenue Service (SARS) is under way, and this is expected to contribute to increased tax revenue over the medium term.
- South Africa aims to strengthen its progressive tax system, while broadening the tax base and removing exemptions. In line with this approach, government will review tax incentives over the medium term, and repeal or redesign those that are inefficient or inequitable.