Finance Minister, Pravin Gordhan, began his 2017 budget speech by emphasizing the harsh reality facing South Africans: unemployment is extremely high, economic growth is slow, and many businesses and families are under considerable stress.
In an effort to address this challenging situation, the tax proposals this year are expected to raise an additional R28 billion. The central thrust of government’s spending programmes will continue to be redistribution in support of education, health services and municipal functions in rural areas.
Some of the main tax proposals outlined in the budget were as follows:
A new top personal income tax rate of 45 % for those with taxable incomes above R1.5 million, combined with partial relief for bracket creep
An increase in the dividend withholding tax rate from 15 % to 20 %, effective 22 February 2017
An increase of 30c/litre in the general fuel levy and 9c/litre in the road accident fund
Increases of between 6 % and 10 %, in the excise duties for alcohol and tobacco
Other changes proposed:
The flat rate of tax of 41% for trusts (other than special trusts) to be increased to 45%
Withholding taxes on non-resident sellers of immovable property be increased from 5% to 7.5% for non-resident individuals, from 7.5% to 10% for non-resident companies, and from 10% to 15% for a non-resident trust
Some tax relief:
There will be a marginal increase in the threshold for taxable income, from R75 000 to R75 750
There will be an increase in the threshold above which transfer duty is paid, from R750 000 to R900 000
The annual allowance for tax-free savings accounts will be increased to R33 000
The medical tax credit will be increased in line with inflation
Further consultations are currently taking place on the tax on sugary beverages (the tax will be implemented later this year once details are finalised and the legislation is passed)
The proposed carbon tax and its date of implementation will be considered further in Parliament this year
The medical tax credit is in line for a reduction in future as part of financing the National Health Insurance.
Capital gains tax inclusion rate for individuals, special trusts and insurers’ individual policyholder funds will remain at 40%, and for other taxpayers at 80%
The annual exclusion of R40 000 on capital gain or capital loss for individuals and special trusts will remain the same for 2017/2018
The annual exclusion on the death of an individual will remain at R300 000 for the year of death.
Although measures are proposed to strengthen the Estate Duty and Donations Tax, there were no changes to Estate Duty, Donations Tax or Securities Transfer Tax provisions
Normal rates of tax for companies will remain at 28%
Note that these are proposals as per the budget speech, many of which are yet to be implemented. We will keep you posted on further developments. Feel free to contact our offices with any queries.