2020/2021 Budget Speech

On 24 February 2021, the Finance Minister of South Africa, Mr. Tito Mboweni delivered the 2021/22 Budget Speech.  COVID-19 was a main feature in the budget as R10 Billion will be reserved to buy and deliver vaccines.  This will be effected within a 2 year period and increased the contingency reserved by R7 Billion to obtain more vaccines.  The plan is to vaccinate two thirds of the population over a 12-month period.

Personal Income Tax Personal and CGT

Government will be increasing the personal income tax bracket by 5% on average.  As such, individual taxpayers will pay less income tax during this tax year than the previous year. 

Individuals who earn more than the R1.5 million bracket in terms of taxable income will be taxed at 45%.  CGT will remain at 18% and the first R40 000 exempt capital gains has not been amended.

Households, more specifically, lower income earners will get more relief.

Tax scrutiny for the wealthy

SARS has been tasked to establish a unit to improve compliance of individuals with wealth and complex financial arrangements. These individuals will be due to “receive communication during April 2021”.

Corporate Income Tax

The current company tax rate is 28% and as such, Treasury has communicated that it is committed to reducing the rate over the medium terms, further noting that high tax rates reduce competitiveness and create an incentive for profit shifting to lower tax jurisdictions.

In light of the above, the corporate tax income rate will now be decreased to 27% for companies starting on or after 1 April 2022.

VAT

Value-added Tax remains at 15%.

“Super fine” maize meal has been added to the VAT zero rated list.

Fuel levies

The fuel levy will be increased by 15c a litre from 7 April 2021.

The Road Accident Fund (RAF) levy will be increased to 11c a litre.

All taxes now represent 39.7% of the total price of a litre of 93 petrol and 44% of diesel.

Sin taxes

Excise duties on alcohol and tobacco will increase by 8%.

Tax on beer will increase from 181c on a 340ml to 196c.

Wine will increase from R4.39 a litre to R4.74 a litre.

Fortified will increase R14.36 to R15.51 a litre.

Sparkling wine will increase from R^8.73 to R74.23 a bottle.

Traditional African beer remains unchanged at R7.82 a litre

Cigarette tax will increase from R17.40 for a pack of 20 to R18.79

Vapes and other tobacco the excise rate (75% of the rate applied to a pack of ciagarettes) remains unchanged.

S12J tax breaks

Section 12J of the Income Tax Act No. 58 of 1962 was legislated by the South African Government to incentivise South African taxpayers to invest in local companies and to receive a tax deduction of up to 100%. It was designed to provide individuals, companies and trusts with a tax incentive to invest in venture capital companies (VCCs), which fund small and medium-sized enterprises that are believed to have long-term growth potential in economic sectors that are often hard-pressed for financing. Therefore, Section 12J companies generally have a focused investment mandate and invest in several sectors including: Hotel, lodge, student residences and B&Bs; Asset rental companies; Technology; Agriculture; Franchises; Manufacturers; Renewable energy; and General SMEs.

Treasury has noted that Section 12 J did not have the desired effect and as such, this scheme will be terminated at the end of June 2021.  

Green Plastic Bags

Plastic bags are currently taxed at 25c a bag. Government has introduced a 12.5c levy per bag.  It is believed that they “emit less greenhouse gas, they still contribute to littering and marine pollution”.

Travel and work from home benefits are under review

SARS has decided to review tax provisions for travel and working from home.

“In light of the large-scale migration to working from home over the past year, Treasury will review current travel and home office allowances to investigate their efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives.”

Public service wage bill

It is anticipated that there will be a significant decreased in the public service wage bill.

Social Grants

Social grants and employment creation will be increased.

Exchange control

In the 2020 Budget, Treasury confirmed that there will be a revamp of the exchange control system by the Financial Intelligence Centre and SARS.  It is anticipated that it will be ‘substantively’ completed in 2021.