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Budget 2017

03 Mar 2017

Frances BurgerFinance Minister, Pravin Gordhan announced various tax proposals during his budget speech on 22 February 2017. In his speech, the Minister announced tax increases that will impact taxpayers and their tax planning.

The proposals included the following (previous amounts in brackets):

Personal Income Tax:  A new super tax bracket has been introduced

  • The lowest tax rate of 18% applicable on taxable income increased up to R189 880 (R 188 000)
  • The Marginal rate of 41% applicable on taxable income increased up to R 708 300 (R 701 300)
  • A new super tax bracket of 45% on taxable income above R1 500 000 was introduced.

Trusts:  Income tax rate increases to the super tax bracket

The income tax rate applicable to income retained by trusts will increase from 41% to the super tax bracket of 45%.

Dividend Withholding Tax increases:

The dividend withholding tax rate will be increased from 15% to 20%. The increased rate will be effective from 22 February 2017.   This increases the effective corporate tax rate for companies to 44.8%.  

Transfer Duty:

Residential properties purchased on or after 1 March 2017 will enjoy the benefit of an increased transfer duty-free threshold of R 900 000 (previously R 750 000). To transfer a properties with a value of more than R10 000 million will incur a transfer duty of 13%.  

Withholding Tax on the sale of Immovable Property by Non-Residents increases:

The withholding tax will be increased from:

  • 5% to 7.5% for individuals
  • 7.5% to 10% for companies
  • 10% to 15% for trusts

Please note this is not a final withholding tax and the non-resident can still apply for a directive with SARS to prove it should be less.  

VAT:  Fuel to become subject to VAT

The VAT rate remained unchanged but various amendments to the VAT legislation were proposed with the most important being the possible removal of the zero-rating of fuel.  It has been mentioned that the fuel levy should remain stable if fuel becomes subject to VAT.  

Fuel levies:

The general fuel levy on petrol and diesel will increase by 30 cents per litre and the Road Accident Fund levy increases by 9 cents per litre. The increases will be effective from 5 April 2017.

Other proposals:

  • It is proposed that the foreign employment income tax exemption for South African residents will only be applicable to the extent that the foreign employment income is actually subject to tax in the foreign country.
  • Tax free savings account annual allowance increases to R33 000 per annum (R30 000).
  • Anti-avoidance measures in respect of section 7C are proposed to include loans made to companies which are owned by a trust.
  • Sugar tax on sugary beverages will be implemented later this year. It is proposed that a tax of 2.1 cents will be levied for every gram of sugar above the allowed 4 grams of sugar per 100 ml.

Kindly take note that this is only a summary of the most important points of the proposals announced by the Minister and that the final legislation may differ from these proposals. Please contact Frances Burger at our Somerset West office for more information on 021 852 0382

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