Taxpayers received a welcome message of support from Finance Minister, Tito Mboweni, delivering his 2021 Budget Speech. In adopting a focus on economic recovery, following an unprecedented year of job losses, the Minister has for a second consecutive year afforded some relief to taxpayers with an above-inflation increase in the personal income tax brackets and rebates.

Despite the standing budget deficit, the Minister decided not to increase tax rates and has also withdrawn the decision communicated in the Medium-Term Budget Policy Statement to levy tax increases totalling R40 billion over the next four years.

Whilst the aim was not to drum up additional revenue with new tax policies, the Budget nonetheless delivered some interesting insights from a tax perspective. Most interesting, and in fulfilment of a promise made in the 2020 Budget Speech, National Treasury has proposed to reduce the corporate tax rate by 1% (one percent), with the new rate of 27%applicable from 1 April 2022. This decision was taken with the hope of further broadening the tax base and increasing South Africa’s attractiveness as an investment destination, as well as reducing base erosion and profit shifting.

The Minister also made some interesting announcements regarding the taxation of wealthy persons and the introduction of future wealth taxes. SARS will establish a dedicated unit to investigate the compliance of wealthy individuals, with a focus on those individuals with complex financial arrangements. At the same time, the Government will begin consolidating wealth data for taxpayers sourced through third-party information to further assess the feasibility of a wealth tax.

Other noteworthy changes include a proposed increase in the UIF contribution ceiling to R17,711.58 (which is open for public comment until 31 March) and excise or “sin” taxes to be increased by 8%, in another blow to the alcohol and tobacco industries following the prohibitions of related products as a result of the Covid-19 lockdown restrictions. The negative impact here, however, is a likely increase in the purchase of illicit tobacco and alcohol products, meaning additional revenue losses.

Individual Tax

Granting above inflation personal income tax relief
of R2.2 billion by adjusting brackets and rebates

VCC Tax Incentive

No extension of the venture capital company tax
incentive after 30 June 2021.

Income Tax on Companies

Corporate income tax rate decreasing to 27% for
the years of assessment commencing on or after 1 April 2022.

Fuel Levy

General fuel levy increases by 15 cents per liter,
and the road accident fund levy increases by
11 cents per liter on 7 April 2021.

Excise Duty Tax

Increase of 8 percent (%) in specific excise
duties on tobacco and alcohol

To download the full Budget Speech Tax Highlights, please click on the button below.

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