A summary of the main tax changes that were proposed during the National Budget speech presented on 26 February 2020 for tax year ending 28 February 2021:

  • An increase in the personal income tax brackets and rebates will result in a relief of R2 billion. For taxpayers under the age of 65 years the primary rebate will increase from R79 000 to R83 100.
  • Slight increase in the medical tax credits to R319 per month.
  • To motivate South Africans to save and invest more the annual contribution limit for tax-free savings accounts (TFSA) will increase from R33 000 to R36 000 from 1 March 2020.
  • An inflationary adjustment will cause for the duty-free threshold on the purchase of residential property to increase from R900 000 to R1 000 000.
  • Good news for South African tax residents who spend more than 183 days being employed outside of RSA, the cap on the exemption of foreign remuneration will increase from R1 000 000 to R1 250 000 per year effective from 1 March 2020.
  • The fuel levy will increase with 25c per litre which includes 9c increase in the Road Accident Fund (RAF) levy.
  • The carbon tax rate will increase by 5,6%.
  • Increase in excise duties on alcohol and tobacco by between 4.4 and 7.5 per cent. Also, government will introduce a new excise duty on heated tobacco products, to be taxed at a rate of 75 per cent of the cigarette excise rate with immediate effect. A tax on e-cigarettes (for example, vapes) is also being considered to take effect in 2021, in line with international trends.

Below is a short tax guide including tables for easy reference. For comprehensive tax guidance refer to the SARS website – www.sars.gov.za

Tax Guide for tax year ending 28 February 2021

Individuals and trusts Income tax rates for natural persons and special trusts

Year of assessment ending 28 February 2021

Taxable income (R) Taxable rates
0 – 205 900 18% of each R1
205 901 – 321 600 37 062 + 26% of the amount above 205 900
321 601 – 451 100 67 144 + 31% of the amount above 321 600
451 101 – 584 200 105 429 + 36% of the amount above 451 100
584 201 – 744 800 155 505 + 39% of the amount above 584 200
744 801 – 1 577 300 218 139 + 41% of the amount above 744 800
1 577 301 and above 559 464 + 45% of the amount above 1 577 300

 

Tax thresholds
2020/21 2019/20
R R
Below 65 years of age 83 100 79 000
Aged 65 and below 75 128 650 122 300
Aged 75 and over 143 850 136 750

 Trusts

 The tax rate on trusts (other than special trusts which are taxed at rates applicable to individuals) is 45%.

 Retirement fund lump sum withdrawal benefits Taxable income

Rate of tax
R R
0 – 25 000 0% of taxable income
25 001 – 660 000 18% of taxable income above 25 000
660 001 – 990 000 114 300 + 27% of taxable income above 660 000
990 001 and above 203 400 + 36% of taxable income above 990 000

 

Exemption for interest and dividend income

 The annual exemption on interest earned by individuals younger than 65 years (R23 800) for individuals 65 years and older (R34 500) remains the same.

 Dividends

 The dividend withholding tax rate remains unchanged on 20% in respect of dividends paid (as defined) on or after 22 February 2017.

 Foreign Dividends

 Most foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

 Deductions

Pension, provident and retirement annuity fund contributions

 Amounts contributed to pension, provident and retirement annuity funds during a year of assessment are deductible by members of those funds. Amounts contributed by employers and taxed as fringe benefits are treated as contributions by the individual employees.

The deduction is limited to 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement fund lump sums and severance benefits). The deduction is further limited to the lower of R350 000 or 27.5% of taxable income, before the inclusion of a taxable capital gain. Any contributions exceeding the limitations are carried forward to the next year of assessment, and are deemed to be contributed in that following year.

Donations

Deductions in respect of donations to certain public benefit organisations are limited to 10% of taxable income (excluding retirement fund lump sums and severance benefits).

Medical and disability 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) by the individual who paid the contributions up to R319 (PY: R310) for each of the first two persons covered by those medical schemes, and R215 (PY: R209) for each additional dependant; and

 in the case of

o an individual who is 65 and older, or if an individual, his or her spouse, or his or her child is a person with a disability, 33.3% of the sum 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; or

o any other individual, 25% of an amount equal to the sum of 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 the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).

Corporate tax rates

Companies, PSPs and foreign resident companies

The tax rate remains unchanged on 28%.

 

 Small business corporations

Financial years ending on any date between 1 April 2020 and 31 March 2021 Taxable income Rate of tax
R R
0 – 83 100 0% of taxable income
83 101 – 365 000 7% of taxable income above 78 150
365 001 – 550 000 19 733 + 21% of taxable income above 365 000
550 001 and above 58 583 + 28% of the amount above 550 000

 

Micro businesses

Financial years ending on any date between 1 March 2019 and 28 February 2020 (unchanged since prior year) Taxable turnover Rate of tax
R R
1 – 335 000 0% of taxable turnover
335 001 – 500 000 1% of taxable turnover above 335 000
500 001 – 750 000 1 650 + 2% of taxable turnover above 500 000
750 001 and above 6 650 + 3% of taxable turnover above 750 000

 

Effective capital gains tax rates (CGT) 

The maximum effective rate of tax on capital gains on the disposal of assets remains unchanged – individuals and special trusts 18%, companies 22,4% and other trusts 36%

Other taxes, duties and levies

Value-added Tax (VAT)

The standard VAT rate remains unchanged on 15% (14% until 31 March 2018) on the supply of goods and services by vendors registered for VAT. 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. Certain supplies are subject to a zero rate or are exempt from VAT.

Transfer duty

Government proposed to raise the duty-free threshold on the purchase of a residential property from R900 000 to R1 million, in order to adjust for inflation.

Transfer duty is payable at the following rates on transactions in respect of acquisition of property on or after 1 March 2020 which are not subject to VAT. Value of property (R)

 Rate
0 – 1 000 000 0%
1 000 001 – 1 375 000 3% of the value above 900 000
1 375 001 – 1 925 000 11 250 + 6% of the value above 1 375 000
1 925 001 – 2 475 000 44 250 + 8% of the value above 1 925 000
2 475 001 – 11 000 000 88 250 + 11% of the value above 2 475 000
11 000 001 and above 1 026 000 + 13% of the value above 11 000 000

 

Estate duty

Estate duty is levied on property of residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses.

Donations tax

Donations tax is levied at a flat rate of 20% on the value of property donated, up to R30 million. Donations exceeding R30 million is taxed at a rate of 25%. The first R100 000 of property donated in each year by a natural person is exempt from donations tax;

Skills Development Levy (SDL)

A skills development levy (SDL) is payable by employers at a rate of 1% of the total remuneration paid to employees. Employers paying annual remuneration of less than R500 000 are exempt from the paying the levy.

 Unemployment Insurance Contributions (UIF)

Unemployment insurance contributions are payable monthly to SARS by employers on the basis of a contribution of 1% by employers and 1% by employees, based on employees’ remuneration below a certain amount. Employers not registered for PAYE or SDL purposes must pay the contributions to the Unemployment Insurance Commissioner. 

Source: Budget Analysis and Summary Report 2020 compiled by South African Institute of Chartered Accountants