2018 South African Budget Speech

South Africa

Report from our correspondent Lutando Mvovo, South Africa

Budget for 2018-19 – direct taxation

The Budget for 2018-19 was presented to Parliament by the Minister of Finance on 21 February 2018. Details of the Budget with respect to direct taxation, which, unless stated otherwise, will apply from 1 March 2018, are summarized below. For details with respect to indirect taxation, see South Africa-1, News 22 February 2018.

(a)

The Budget proposes, among other things, to:

–	review the controlled foreign company high tax exemption;
–	review the tax treatment of excessive debt financing;
–	refine the anti-avoidance rules dealing with share buybacks and dividend stripping;
–	refine rules for debt-financed acquisitions of controlling interest in an operating company;
–	clarify the tax treatment of amounts received by portfolios of collective investment schemes;
–	extend the application of controlled foreign company rules to foreign companies held through foreign trustsA comprehensive look at trusts in international tax law, including definitions, practical examples, key cases, and synonyms. and foundations; and
–	review the application of taxation rules to non-residents operating short-term insurance business through branches in South Africa.

(b) Personal taxation

The Budget proposes, among other things, to:

–	partially adjust the bottom three personal income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... brackets for inflation through a 3.1{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} increase. The top four brackets will remain unchanged;
–	review the tax treatment of contributions to retirement funds situated outside South Africa;
–	align tax treatment of preservation funds upon emigration;
–	allow transfers to pension and provident preservation funds after retirement;
–	increase the primary, secondary and tertiary rebates from ZAR 13,635 to ZAR 14,067; secondary from ZAR 7,479 to ZAR 7,713 and tertiary rebates ZAR 2,493 to ZAR 2,574; and
–	increase monthly medical tax credits from ZAR 303 to ZAR 310 per month for the first two beneficiariesIn tax law, a beneficiary is the person or entity entitled to receive funds or other benefits from an arrangement, such as a trust or a will. Beneficiaries are often named explicitly in legal documents, ensuring that their rights and interests are protected. The concept of a beneficiary also extends to corporate contexts, such as when a company or trust....

South Africa

Report from our correspondent Lutando Mvovo, South Africa

Budget for 2018-19 – indirect taxation

The Budget for 2018-19 was presented to Parliament by the Minister of Finance on 21 February 2018. Details of the Budget with respect to direct taxation, which, unless stated otherwise, will apply from 1 March 2018, are summarized below. For details with respect to direct taxation, see South Africa-1, News 22 February 2018.

(a) Value added tax (VAT)

Proposals include:

–	increasing VAT from 14{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 15{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}, effective 1 April 2018;
–	clarifying the zero rating of brown bread in order to reflect the original policy intent that only brown bread and whole wheat bread will be zero rated. Products such as rye or low glycemic index bread consumed by wealthier household will not be zero rated; and
–	publishing the updated regulations prescribing foreign electronic services subject to VAT.

(b) Excise duties

Proposals include:

–	increasing excise duties on alcoholic beverages by between 6{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} and 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e};
–	increasing excise duties on tobacco products by 8.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e};
–	further additional measures to reduce consumption of tobacco products, including a minimum price and stronger enforcement will be explored by the National Treasury and the Department of Health;
–	increasing the ad valorem excise duty rates from 5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} and 7{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 7{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} and 9{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} respectively;
–	increasing the maximum ad valorem excise duty for motor vehicles from 25{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 30{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}; and
–	the classification of cellular telephones will be updated to include smart phones in order to ensure that they attract ad valorem excise duties.

Proposals include:

–	increasing the general fuel levy by 22 cents/litre and the Road Accident Fund levy by 30 cents/litre, effective 4 April 2018;
–	confirmation that the health promotion levy, which taxes sugary beverages, will be implemented from 1 April 2018. A policy brief on the use of taxes to encourage healthy choices will be published shortly;
–	increasing the environmental levy on incandescent light bulbs from ZAR 6 to ZAR 8 to incentivise more energy–efficient behaviour, effective 1 April 2018;
–	increasing the plastic bag levy by 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 12 cents per bag, effective 1 April 2018; and
–	increasing vehicle emissions tax to ZAR 110 for every gram above 120 gCO/km for passenger vehicles and ZAR 150 for every gram above 175 gCO/km for double cab vehicles, effective 1 April 2018.

(d) Estate duties

Proposals include:

–	increasing the estate duty rate from 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 25{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the dutiable amount of estates of more than ZAR 30 million; and
–	increasing the donations tax rate from 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 25{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on donations of more than ZAR 30 million.

*For clarity, the term Double Tax TreatyA Double Taxation AgreementA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... (DTAA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and...), also known as a Double TaxationDouble Taxation occurs when the same income or financial transaction is taxed twice, typically in different jurisdictions. It can arise in two primary contexts: economic double taxation, where the same income is taxed twice in the hands of different taxpayers, and juridical double taxation, where the same taxpayer is taxed on the same income in more than one country. Double... Treaty (or a Tax TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and...), is an international

Related Articles

Responses