2017 Budget Speech summary

2017-03-16 06:02

IN his 2017 budget speech on February 22, some of the key points of which are summarised below, the South African Minister of Finance, Pravin Gordhan, indicated that South Africa needs to raise an additional R28 billion in tax revenues and reduce spending by a total of R26 billion over the next two years. The increase in revenue will be funded mainly by the following measures:

•A new maximum marginal income tax rate of 45% for those with taxable income over R1.5 million per annum (an increase from the current maximum rate of 41%).

•An increase in the dividend withholding tax rate from 15% to 20% (effective February 22). The exemption and rates for foreign dividends will also be adjusted in line with the new rate, effective for years of assessment commencing on or after 1 March 2017.

•An increase of 30 cents per litre in the general fuel levy and nine cents per litre in the Road Accident Fund levy.

•Increases in excise duties for alcohol and tobacco of between 6% and 10%.

•No change to the value-added tax (VAT) rate of 14%.

•An increase in the transfer duty-free threshold for residential properties from the current R750 000-00 to R900 000-00.

•No increase in the corporate tax rate of 28% (which is considered to be higher than the Organisation for Economic Co-operation and Development average of 25%).

•An increase in the income tax rate applicable to income retained by trust from 41% to 45%.

•An increase in the withholding tax on immovable property sales by non-residents from 5% to 7.5% for individuals, 7.5% to 10% for companies and 10% to 15% for trusts.

Trust

Following the introduction of section 7C to the Income Tax Act, 1962 (low or no-interest loans to trusts), it is proposed that the anti-avoidance rule will be extended to cover low or interest-free loans to companies owned by trust (as opposed to the trust directly). However, this anti-avoidance rule should apply only to trusts used for estate planning and not, for example, top employee share scheme trusts and certain trading trusts (the existing section 7C does contain a number of carve-outs).

This article is an excerpt from Legal Times, March 3.

You could contact me on 083 399 3905, my office on 032-944 3051 or e-mail me on juggieg@telkomsa.net for an appointment or further information and any other financial advice.

Disclaimer

The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licenced financial service provider.

Minister of Finance, Pravin Gordhan, indicated that South Africa needs to raise an additional R28 billion in tax revenues and reduce spending by a total of R26 billion over the next two years

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