In Industry News

24 February 2022  | Johnny Davis
 

“Now is not the time to increase taxes and put the recovery at risk! Accordingly, we have decided to keep money in the pockets of South Africans”.

Finance Minister Enoch Godongwana’s budget speech on Wednesday brought welcome news to South Africans from a tax perspective, with the ongoing impact of the Covid-19 pandemic and the resulting financial strain that most South Africans are struggling with being the reason for the most significant tax changes implemented.

The most important tax proposals and amendments tabled, are as follows:

1. Personal Income Tax

The personal income tax brackets and rebates will be adjusted by 4.5%, in line with inflation. This allows for above-inflation increases in tax brackets, effectively decreasing personal income tax rates. Here is a summary of the tax rates applicable from 01 March 2022 to 28 February 2023:

Taxable income (R)  Rates of tax (R)
 1 – 226 000  18% of taxable income
 226 001 – 353 100  40 680 + 26% of taxable income above 226 000
 353 101 – 488 700  73 726 + 31% of taxable income above 353 100
 488 701– 641 400  115 762 + 36% of taxable income above 488 700
 641 401 – 817 600  170 734 + 39% of taxable income above 641 400
 817 601 – 1 731 600  239 452 + 41% of taxable income above 817 600
 1 731 601 and above  614 192 + 45% of taxable income above 1 731 600

 

Medical tax credits will increase from R332 to R347 per month for the first two members, and from R224 to R234 per month for additional members.

2. Employment tax incentive

The employment tax incentive will be expanded through a 50% increase in the maximum monthly value, to R1 500.

3. Corporate Tax

Minister Godongwana correctly stated that “restructuring the corporate income tax system is an important part of our efforts to create a conducive environment for businesses to grow, increase investment and employ more people.”

As alluded to in the 2021 budget, the corporate tax rate is to reduce to 27% for tax years ending on or after 31 March 2023.

The following rates remained unchanged;

VAT at 15% Dividends withholdings tax

at 20%

All inclusion rates for

Capital Gains Tax (CGT)

Interest and royalty withholding

tax rates at 15%

 

4. Excise duties  

Excise duties on alcohol and tobacco will increase by between 4.5% and 6.5%.

5. Fuel Levies

To provide some relief to households, no increases will be made to the general fuel levy on petrol and diesel for 2022/23.

6. Retirement reform

Minister Godongwana announced that draft legislation that proposes partial access to retirement funds, while encouraging a preservation of a bulk of individual retirement savings, will be published by mid-year.

“Government has also proposed a fundamental restructuring of the retirement system for individuals to allow for greater preservation and partial access to funds through a ‘two-pot’ system.

“Part of this proposal includes the possibility of short-term access, which would be dependent on the approval by trustees of each fund,” he stated.

Overall, the 2022 Budget Speech focused on collective participation and buy-in that will enable South Africa to steer the ship in the right direction.

Though as Minister Godongwana reminds us, “a swallow does not a summer make”. The journey to recovery may still be long, but it seems as though we are off to a good start.

As soon as the new financial year starts, we will keep a close eye on exactly how these changes are implemented and will further advise on how this may affect you. Watch this space!

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