What Will the Budget Look Like in 2022?

2021 BUDGET HIGHLIGHTS

• Proposal to reduce corporate income tax rate to 27% for companies with years of assessment commencing on or after 1 April 2022. This will be done alongside a broadening of the corporate income tax base by limiting interest deductions and assessed losses.
• Personal income tax relief of R2.2bn by adjusting brackets and rebates for the 2022 year of assessment.
• Fuel levies will increase by 27c per litre from 7 April 2021.
• 8% increase in excise duties on alcohol and tobacco
• UIF contribution ceiling will be increased to R17 711.58 per month from R14 872. Maximum contribution now increases from R148.72 to R177.12.
• No extension of the venture capital company tax incentive after 30 June 2021 (Section 12J).
• Compulsory annuitisation for provident fund benefits to align with the pension and retirement annuity fund rules.

Use of company car

The % included in an employee’s taxable income remains at 3.5% of the determined value of the vehicle. Where the vehicle is subject to a maintenance plan, at the time the employer acquired the vehicle, the taxable value is 3.25% of the determined value.

80% of the fringe benefit must be included in the employee’s remuneration for purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of motor vehicle for the tax year will be for business purposes.

On assessment the fringe benefit for the tax year is reduced by the ratio of distance travelled for business purposes substantiated by a logbook divided by the actual distance travelled during the tax year.

On assessment further relief is available for the cost of license, insurance, maintenance, and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a log book.

Retirement fund contributions

Amounts contributed to pension, provident and retirement annuity funds during a year of assessment are limited to 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement lump sums and severance benefits). The deduction is limited to a maximum of R350 000.

Tax-free savings accounts

The annual limit on contributions to tax-free savings accounts will remain at R36 000

Medical expenses

In determining tax payable, individuals are allowed to deduct:

Monthly contributions to medical schemes (a tax rebate referred to as a medical scheme fees tax credit) up to R332 for the individual who paid the contributions and the first dependant on the medical scheme and R224 for each additional dependant; and in the case of:

• Taxpayers 65 and older, or if that person, his or her spouse or child is born with a disability, 33.3% of qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed 3 times the medical scheme fees tax credits for the tax year;
• Any other taxpayer, 25% of an amount equal to qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed 4 times the medical scheme fees tax credits for that tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).

VAT

VAT is levied at the standard rate of 15% on the supply of goods and services by registered vendors.

A vendor making taxable supplies of more than R1 million per annum must register for VAT

A vendor making taxable supplies of more than R50 000 but not more than R1 million per annum may apply for voluntary registration.

DONATIONS TAX

The annual donations tax exemption for natural persons remains unchanged at R100 000 and the rate also remains 20%

If the donations exceed R30 million, the rate of donations tax will change to 25%

CAPITAL GAINS TAX

Maximum effective rate of tax:

Individuals and special trusts – 18.00%

Companies – 22.40%

Other trusts – 36.00%

The exclusion threshold for capital gains and losses for individuals and special trusts remains at R 40 000.

The annual exclusion for individuals in the year of death remains at R300 000. The primary residence exclusion for individuals is R 2 million.

The capital gains exclusion on disposal of a small business when a person is at least 55 years old, will remain at R1 800 000 when the market value of the active business assets does not exceed R 10 000 000.

DIVIDENDS TAX

Dividends received by individuals from South African companies are taxed at a rate of 20% which is withheld by the entities paying the dividends to the individuals.

ESTATE DUTY

Estate duty is levied at a rate of 20% on the first R30 million and at a rate of 25% above R30 million on property of residents and South African property of non-residents. A basic deduction of R 3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organizations and property accruing to surviving spouses.

SECURITIES TRANSFER TAX

Tax is imposed at a rate of 0.25 of a per cent on the transfer of listed or unlisted securities. Securities consist of shares in companies or member’s interest in close corporations.

 

DISCLAIMER

BVSA accepts no liability whatsoever for any losses, damage or cost incurred which may arise from information published in this document. Please contact anyone of the directors of BVSA before any decisions are made regarding information published.