THE BUDGET SPEECH 2024/2025
Enoch Godongwana, our Minister of Finance, presented the budget speech on February 21st, focusing on addressing immediate fiscal pressures. To tackle a consolidated budget shortfall of 4.9% of the gross domestic product, taxes have been raised by approximately R15 billion.
In this newsletter, we shall highlight the main proposals coming out of the 2024/25 Budget Speech.
This year’s budget brings no adjustments for inflation to personal income tax tables or alterations to medical tax credits. However, there will be increases in excise duties on alcohol, ranging between 6.7% and 7.2%, and on tobacco, with increases ranging between 4.7% and 8.2%.
Notably, the general fuel levy, or Road Accident levy, will remain unchanged for the third consecutive year, providing stability in this aspect of taxation.
KEY CHANGES
In addition to the updates mentioned, there are some other significant proposals from this year’s budget, building upon initiatives introduced last year:
– Producers of electric vehicles in South Africa will now qualify for a 150% claim on qualifying investment spending. This incentive aims to accelerate the transition towards sustainable transportation and support the growth of the electric vehicle industry within the country.
– A minimum tax of 15% will be imposed on all multinationals operating in South Africa, aligning with an international agreement signed by over 135 countries. This measure ensures that regardless of where a multinational’s profits are located, they will contribute a minimum level of tax, promoting consistent treatment and addressing tax avoidance practices.
– Solar Tax Incentives for Individuals allowing a rebate against a tax liability of 25% of the cost of the new and unused solar photovoltaic panels up to a maximum of R15,000 sunsets on 29 February 2024.
–Enhanced Renewable Energy Incentive for Businesses allowing an upfront 125% of the cost to acquire qualifying assets used in the generation of electricity (including supporting structures) against taxable income remains available until 28 February 2025.
–Third Party Data Annual Submissions for Trusts IT3(t)’s will have to be submitted to SARS by no later than 30 September 2024. This is a form that trustees of all South African tax resident trusts will be required to issue in respect of any amount vested in a beneficiary, including income (net expenditure), capital gains and capital amounts distributed.
Tax thresholds
There has been a no change 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 remained unchanged:
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.
Corporate Income Tax
The corporate income tax rate remains 27% for corporates with years of assessment ending on or after 1 March 2023 to 31 March 2025. There remains a limit the use of tax/assessed losses for corporates to 80% of taxable income or R 1 million, whichever is the greater.
Retirement lump sum taxation
On retirement (55 years), the first R550,000 (R500,000 in 2022) of a retirement lump sum is tax-free.
On a pre-retirement withdrawal, the first R27,500 (R25,000 in 2022) of a pre-retirement lump sum is tax-free.
WHAT ELSE HAS NOT CHANGED?
Interest Exemptions
The local interest exemptions remain unchanged:
-The exemption on interest earned for individuals younger than 65 years remains R23,800 per annum.
-The exemption for individuals 65 years and older remains R34,500 per annum.
-Foreign interest remains fully taxable.
Annual exclusion
The annual exclusion remains R40,000 per annum and R300,000 in the year of death
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.
Donations Tax
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.
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:
-7.5% of gross selling proceeds for a non-resident individual,
-10% for a non-resident company and
-15% for a non-resident trust.
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%.
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.
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.
Estate Duty
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.
CONTACT US
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:
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
Landline (087 802 7811)