This was one of the most taxpayer-friendly budgets delivered in ages. It seems as if government—especially if you consider the rules around exchange control—are saying, “Please trust us enough to keep your money in South Africa, but if you don’t, you are free to move it offshore if you please.”
Here’s a list of the most important Budget 2020 highlights:
- Tax revenue projected at R1,425.4bn
- R370.5m consolidated budget deficit
- No increase in VAT, capital gains tax (CGT) inclusion rates or CGT annual exclusion rates
- A new capital flow management system. For exchange control, this means that all foreign-currency transactions will be allowed automatically, other than for specifically pre-identified transaction types. This is a significant change from an automatically negative exchange control system to an automatically positive exchange control system.
- Government will consider extending the 30 June 2021 sunset clause for Virtual Capital Companies (VCC) (Section 12J of the Income Tax Act). It will also introduce measures to alleviate unintended tax consequences arising currently from legitimate closure of such companies.
- Legislation to be introduced to curb tax schemes involving capitalisation of debt owed by trust-owning companies to escape provisions of section 7C. Section 7C of the Income Tax Act was introduced in 2017 to curb interest-free funding of trust structures to house high-growth assets (a common estate duty planning mechanism).
- Abuse of the recently introduced income tax incentive to provide for bursary programmes has been identified and will be addressed through legislative intervention effective 1 March 2020.
- Financial emigration for South African Reserve Bank (SARB) purposes to be phased out by 1 March 2021.
- Annual foreign investment applications by individuals in excess of R10m to be subjected to more stringent verification.
- Estimate tax assessments to be issued where returns are outstanding and where relevant material requested by SARS is withheld.
- Legislation to be introduced to deny refunds of any tax until a taxpayer is fully compliant and returns of all taxes submitted.
- The much-publicised foreign remuneration exemption applicable to South African residents working abroad to be increased from R1m to R1.25m effective 1 March 2020.
Below is a table comparing what was and what’s new:
|Top Marginal personal income tax rate||45%||45%|
|Top income tax threshold @ 45%||R1,500,000||R1,577,301|
|Tax exemption for SA residents working abroad||R1,000,000||R1,250,000|
|Primary Rebate||R14 067||R14,958|
|CGT Annual Exclusion||R40,000||R40,000|
|Transfer Duty Threshold||R900,000||R1,000,000|
|TFSA Annual Limit||R33,000||R36,000|
Tax Brackets and Rebates for the 2021 tax year (1 March 2020 – 28 February 2021)
|Taxable income (R)||Rates of tax (R)|
|1 – 205 900||18% of taxable income|
|205 901 – 321 600||37 062 + 26% of taxable income above 205 900|
|321 601 – 445 100||67 144 + 31% of taxable income above 321 600|
|445 101 – 584 200||105 429 + 36% of taxable income above 445 100|
|584 201 – 744 800||155 505 + 39% of taxable income above 584 200|
|744 801 – 1 577 300||218 139 + 41% of taxable income above 744 800|
|1 577 301 and above||559 464 + 45% of taxable income above 1 577 300|
|Secondary (65 and older)||R8 199|
|Tertiary (75 and older)||R2 736|
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