Enoch Godongwana, the South African Finance Minister, presented his first budget speech on February 23. For the most part, it’s a budget that’s beneficial for South African businesses. Business owners can breathe a sigh of relief as they plan for the new tax year, with no big tax increases and a few nice surprises, including R5.2 billion in tax relief.
Personal tax
Minister Godongwana stated that now is not the time to jeopardize the country’s economic recovery. Personal income tax rates will not be used to generate more revenue for the government. Inflation-adjusted personal income tax bands and rebates will increase by 4.5 percent. For people under the age of 65, the annual tax-free threshold will rise from R87 300 to R91 250. Rate of corporate taxation
Corporate tax rate
The corporate income tax rate would be cut from 28 percent to 27 percent for enterprises with an assessment year ending on or after March 31, 2023, according to the Budget Speech. Amendments reducing assessed losses and interest deductions will counteract the reduction in corporate income tax rates.
Deductions for home offices and trips
Although the remote working trend is certain to continue, many employees are unable to claim tax deductions for their home office expenses. A discussion document on the personal income tax regime for remote employees will be released this year, as promised by the National Treasury last year. This is an important issue to keep an eye on for organizations that have adopted work-from-anywhere policies.
Employment Tax Incentive (ETI)
One of the nice surprises in the Budget Speech was a 50% increase in the ETI to a maximum of R1500. We applaud this initiative to encourage businesses to hire more young people as part of our country’s response to the youth unemployment challenge. It will also help small businesses to improve cash
Fuel tax
Fuel and Road Accident Fund taxes will not be increased for the first time in over 30 years. This is great news for frustrated consumers and businesses, as fuel prices are rising in a context of worldwide inflation.
System of two pension pots
Through a "two pot" approach, the government restated its ambitions to overhaul the retirement system to provide more preservation and partial access to money. Public discussions are underway, but it appears unlikely that they would provide results before the budget speech next year. The focus will be on high-income taxpayers.
Taxpayers with high incomes are the focus of attention.
Provisional taxpayers with assets exceeding R50 million will be obliged to declare specific assets and liabilities at market value in their 2023 tax returns, according to the government’s proposal. This is a clear indication that the focus on enforcement will rise in the coming years as a measure to boost tax collection, and it may even pave the way for additional wealth taxes.