BUDGET SPEECH 2017/18 TAX YEAR
- INDIVIDUALS
The maximum marginal rate for natural persons is increased to 45% (previously 41%) and is reached when taxable income exceeds R1 500 000.
The minimum rate of tax remains at 18% on taxable income not exceeding R189 880.
The primary rebate for all natural persons has been increased to R13 635 (previously R13 500). The additional rebate for persons aged 65 years and older is increased to R7 479 (previously R7 407). Persons aged 75 and older are granted a further R2 493 (previously R2 466).
The tax free portion of interest income remains at R23 800 for taxpayers under 65 years, and R34 500 for persons aged 65 years and older. In addition the tax-free savings dispensation for other investments, including collective investment schemes, became operative 1 March 2015 and is R33 000 (previously R30 000) per tax year.
Local dividends tax is increased to a flat 20% rate (previously R15%), effective 22 February 2017.
Foreign dividends are also to be taxed at a flat rate of 20%, but this may be reduced in terms of Double Tax Treaties.
An individual is exempt from the payment of provisional tax if the individual does not carry on any business and the individual’s taxable income –
- Will not exceed the tax threshold (see 4 below) for the tax year, or
- From interest, foreign dividends and rental will be R30 000 or less for the tax year.
- COMPANIES AND CLOSE CORPORATIONS
The rate of normal tax remains at 28%.
The final withholding dividend tax has been increased to a flat rate of 20% on shareholders (previously 15%).
Tax Exempt bodies (e.g. Retirement Funds) will suffer no withholding tax upon production of a tax exemption certificate.
- TRUSTS
The flat rate increase to 45% (previously 41%), although distributions in the same tax year are taxed instead in the beneficiaries hands.
- INDIVIDUAL TAX THRESHOLDS
Liability for tax is as follows:
Under 65 years: R 75 750 (previously R 75 000)
65 to 74 years : R117 300 (previously R116 150)
75 years and older: R131 150 (previously R129 850)
INCOME TAX: INDIVIDUALS AND SPECIAL TRUSTS
Taxable income (R) Rates of tax
0 – 189 880 18% of taxable income
189 881 – 296 540 R 34 178 + 26% of taxable income above R 189 880
296 541 – 410 460 R 61 910 + 31% of taxable income above R 296 540
410 461 – 555 600 R 97 225 + 36% of taxable income above R 410 460
555 601 – 708 310 R149 475 + 39% of taxable income above R 555 600
708 311 – 1 500 000 R209 032 + 41% of taxable income above R 708 310
1 500 001 and above R533 625 + 45% of taxable income above R1 500 000
TRUSTS OTHER THAN SPECIAL TRUSTS – RATE OF TAX – 45%
TAX REBATES:
PRIMARY R13 635
SECONDARY (AGE 65 AND OVER) R7 479
PLUS AGE 75 AND OVER R2 493
- ESTATE DUTY AND DONATIONS TAX
The rate of estate duty and donations tax remains at 20%.
The estate duty abatement (exempt threshold) remains at R3,5 million per person and a surviving spouse may also benefit automatically from any unused deduction in the first dying spouse’s estate. i.e. The abatement remains a combined maximum R7 million for the second dying spouse.
Estate pegging through the use of soft loans to trusts are under review. Proposals are that the asset growth in the trust be included in a deceased estate and that interest free loans to trust be treated as donations.
The first R100 000 of amounts donated in each tax year by a natural person remains exempt from donations tax. Donations between spouses are fully exempt.
- CAPITAL GAINS TAX (CGT)
- The annual capital gain exclusion for individuals increases remains at R40 000.
- The primary residence exclusion from capital gains tax remains at R2 million.
- The capital gain exclusion at death remains at R300 000.
- The effective rate of CGT is the range of 7.2% to 18% for individuals, 22,4% for companies and 36% for Trusts, although correctly structured Trusts can result in the individual rate being applicable.
- TRANSFER DUTY
The rates remain, i.e. property costing less than R900 000 will attract no duty. A 3 percent rate applies between R900 000 and R1,25 million, 6 per cent between R1,25 million and R1,75 million, 8 percent between R1,75 million and R2,25 million, 11 percent between R2,25 million and R10 million and 13 percent thereafter.
- RETIREMENT FUNDS (The tables remain as before)
Retirement Fund Lump Sum Withdrawal Benefits
| Taxable Income | Rates of Tax |
| 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 |
Retirement Fund Lump Sum Retirement Benefits or Severance benefits
| Taxable Income | Rates of Tax |
| 0 – 500 000 | 0% of taxable income |
| 500 001 – 700 000 | 18% of taxable income above 500 000 |
| 700 001 – 1 050 000 | 36 000 + 27% of taxable income above 700 000 |
| 1 050 001 and above | 130 500 + 36% of taxable income above 1 050 000 |
- Tax Harmonisation of Retirement Fund Contributions
As from 1 March 2016 all retirement funds (pension, provident and retirement annuity funds) are treated similarly for tax contribution purposes.
The tax deduction formula of 27,5% per annum (with a cap of R350 000) of the greater of taxable income and remuneration applies to members of all retirement funds, including provident funds.
- Annuitisation
Pension and Retirement Annuity (RA) Funds will still require a compulsory annuity purchase upon retirement with two-thirds of such fund benefits whereas Provident Fund benefits may be commuted in full, until 1 March 2018. The threshold below which a full fund benefit from a Pension or RA is allowed to be commuted is R247 500 effective 1 March 2016.
- MEDICAL EXPENSES
- Taxpayers may in determining tax payable deduct monthly contributions to medical schemes (a tax rebate to be known as a medical scheme fees tax credit) up to R303 for each of the taxpayer and the first dependent on the medical scheme and R204 for each additional dependent.
- An individual who is 65 and older, or if that person, his or her spouse or child is a person 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 individual, 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 the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).
- VAT
The rate of 14% remains unchanged and the compulsory VAT registration threshold remains at R1 million turnover per twelve month period.
- FOREIGN EXCHANGE
The offshore investment allowance remains at R10 million per adult person per calendar year. In addition the R1 million individual single discretionary allowance remains.
- SPECIAL VOLUNTARY DISCLOSURE (SVDP) ONGOING
South Africa’s special voluntary disclosure program gives non-compliant taxpayers the opportunity to correct their tax affairs. With a new OECD global standard for the automatic exchange of financial information between tax authorities coming into effect from September 2017, time is running out for taxpayers who still have undisclosed assets and/or income abroad. SARS and the Reserve Bank thus offer the SVDP to parties with unauthorized foreign assets or income who wish to regularize their affairs, until 31 August 2017.