THE BUDGET SPEECH 2023/2024
Enoch Godongwana, our Minister of Finance delivered his budget speech on Wednesday 23rd February, and with it brought some welcome tax incentives related to renewable energy both for salary earners as well as business owners costing the fiscus R9 billion.
In this newsletter, we shall highlight the main proposals coming out of the 2023/24 Budget Speech.
This year’s Budget announcement provides inflationary adjustments to personal income tax tables, retirement tax tables and transfer duty tables.
Although alcohol and tobacco excise duties will increase in line with inflation, for the second year running, there will be no changes to the general fuel levy of the Road Accident Fund levy.
WHAT WERE THE KEY CHANGES?
Rooftop Solar Panel Tax Incentives for Individuals and Companies.
Corporate Income tax rate becomes 27% for corporates with years of assessment on or after 1 April 2022.
No change to the general fuel levy or the Road Accident Fund (RAF) levy.
Increases in excise duties on alcohol and tobacco by 4.9 %
WHAT WERE THE KEY CHANGES?
The highlights from this year’s Budget and some from last year, are summarised below:
Rooftop Solar Panel Tax Incentive for Individuals allows for a rebate of 25% of the cost of new and unused solar panels (excluding inverters and batteries) but limited to R15,000 per taxpayer and will be allowed for panels brought into use for the first time from 1 March 2023 to 29 February 2024.
Expansion to Solar Tax Incentive for Companies which allows businesses to claim a deduction of 125% in the year in which a renewable energy project is brought into use. There is no limitation of generation capacity. This incentive is applicable from 1 March 2023 to 28 February 2025.
Taxation of Non-Resident Beneficiaries of a South African Trust whereby although capital gains distributed to a non-resident beneficiary are locked and taxed in the trust, a similar rule is being considered for revenue distributions.
Extension date of withdrawal of Practice Notes 31 and 37 which currently allows for certain fees and interest to be deducted against interest revenue were intended to be withdrawn on 1 March 2023, but this implementation has now been delayed.
Diesel Rebate to food manufacturers to be extended until 31 March 2025.
The corporate income tax rate becomes 27% for corporates with years of assessment commencing on or after 31 March 2023.
Companies will be limited to utilise their assessed loss to the greater of R 1million or 80% of their taxable income for years of assessment ending on or after 31 March 2023.
THE FOLLOWING ARE AMENDMENTS APPLICABLE TO THE PERIOD 1 MARCH 2023 TO 29 FEBRUARY 2024
There has been a 5% upward adjustment in the tax-free thresholds for personal income taxes, meaning the amount that a taxpayer can earn before being taxed:
Medical tax credits
If you contribute to a medical aid, you are awarded monthly tax credits. These have also increased by 5%:
Individuals and special trusts
There were some bracket creep adjustments to the personal income tax tables this year with the lowest bracket increasing its threshold by R11,100 and the highest bracket increasing its threshold by R85,400.
The corporate income tax rate will be reduced to 27% for corporates with years of assessment ending on or after 31 March 2023. The trade-off for this cut will be limiting the use of tax/assessed losses for corporates to 80% of taxable income or R 1 million, whichever is the greater.
WHAT HAS NOT CHANGED
The local interest exemptions remain unchanged:
Tax rate for Trusts
Other than specific anti-avoidance rules mentioned above, the income tax rates for trusts (other than special trusts) remain unchanged at 45% for revenue and 36% for capital gains.
Capital gains tax (CGT)
The capital gains tax inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%.
The annual exclusion remains R40,000 per annum and R300,000 in the year of death.
Primary residence exclusion
A primary residence, owned by a natural person or special trust used for domestic purposes may exclude R2 million of the capital gain on sale in calculating CGT.
Sale of small business assets
Provided the market value of a small business does not exceed R10 million, and the sole proprietor or partner held a minimum of 10% in the business, was actively involved in the business for at least 5 years and that person reaches the age of 55, suffers ill-health, or dies, the capital gain from the sale of that business can be reduced by R1.8 million.
Interest withholding tax for non-residents
Interest withholding tax remains at 15% on interest from a South African source payable to non-residents. Interest is exempt if payable by any sphere of the South African government, a bank or if the debt is listed on a recognised exchange.
Disposal of immovable property to non-residents
When a non-resident sells immovable property in South Africa, tax will be withheld from the payment to the non-resident. The tax to be withheld is:
Estate duty is levied on world-wide property of South African tax residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% where the aggregate dutiable value of the property exceeds R30 million.
A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty.
Property left to a spouse is exempt from Estate Duty.
Dividend Withholding tax
Dividend withholding tax remains at 20% on dividends declared to resident and non-residents by South African corporates.
Foreign dividends received by resident individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20% however double tax treaties could reduce this rate.
Donations tax is payable at a flat rate on the value of property disposed of by way of donation or gratuitous disposition. It is levied at a flat rate of 20% on the value of property donated, while any donations exceeding R30 million over a lifetime of a taxpayer will be taxed at a rate of 25%.
The first R100,000 of an amount donated in each year by an individual, however, remains exempt from donations tax.
Property donated to a spouse is exempt from donations tax.
Feel free to contact our Tax Team directly if you require any advice, assistance or more information and we can set up a Zoom, Teams, WhatsApp or traditional call meeting:
Landline (087 802 7811)
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Feel free to contact us directly if you require any advice, assistance or more information and we can set up a Zoom, Teams, WhatsApp or traditional call meeting