During February each year, the Finance Minister of South Africa passes a Budget Speech. In an interesting time, and with the backdrop of a once in a century pandemic experienced in the last year, the Minister was forced to address some looming concerns on the Government borrowing and how he intends on reducing this in the coming years. To quote the Minister: “We owe a lot of people a lot of Money”. With this backdrop the Minister appears to have managed to appease varying sectors with the exception of the Venture Capital Industry and the Trade Unions.
Here are some headlines from the 2021 Budget Speech:
The personal tax brackets have increased at rates above inflation, especially focused on the lower end of the earnings bracket. Herewith the more complete new personal income tax brackets
The UIF ceiling is increased from R14 872 to R17 712. This means that UIF benefit will be paid out in future up to this new ceiling amount and your monthly contributions into the fund will be increased accordingly with the maximum monthly contribution raising from R148.72 to R177.12.
The Government has decided that the Venture Capital Tax Incentive will not be extended beyond 30 June 2021. This will likely make for some energetic debate around Venture Capital Board Roms in South Africa but the ink has already dried as they say.
The fuel Levy increases by 15 cents per litre and the Road Accident Fund Levy by 11 cents per litre from 7 April 2021.
As always the government has increased Sin taxes. In this years budget this will increase by 8%.
Plastic bag levy will be reduced to 12.5c per bag for bio-based plastic bags, from a date to be announced later in the year.
The headline corporate tax rate remains at 28% but it is proposed that this be decreased to 27% from April 2022 . The proposal is to do this in a revenue neutral manner. In general this means that some other allowances will be removed or some other items in our tax legislation will be changed to make up the shortfall such as limiting interest and assessed loss deductions further.
The Small Business Tax rates also remain steady with the exception of the tax free portion. In effect this means a devaluation for these brackets by inflation. See below a full tax table.
With little further fiscal room to increase, and perhaps in the interest of not starting two fights with the Trade Unions at the same time, the VAT rate has remained steady at 15% in this years Budget Speech.
The Government proposed tightening the definition on Employment Tax Incentives to close down some of the abuse of the scheme that has happened in the market. Actual work and record thereof needs to be be done for the salary in future.
No further significant changes other than the usual closing of very technical tax loop holes such as anti-avoidance. Here are links to the more complete budget documents: