Budget 2022 | Tax relief: These are all the big changes

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  • Corporate income tax has been lowered from 28% to 27% in this year’s budget.
  • Personal income taxpayers are also getting some relief.
  • Hikes in excise duties on alcohol and tobacco were kept in line with inflation (between 4.5% and 6.5%) – from above 8% last year.

There was some good news in this year’s budget with a cut in corporate income tax, accommodating adjustments in personal income tax brackets and no hike in the fuel or Road Accident Fund levy – for the first time since 1990.

"Households and businesses are still under financial pressure and are coping with higher obligations, the effects of Covid-19 and increased fuel prices. Now is not the time to increase taxes and put the recovery at risk," Finance Minister Enoch Godongwana said in his maiden budget speech on Wednesday.

Hikes in excise duties on alcohol and tobacco were also kept in line with inflation (between 4.5% and 6.5%) – from above 8% last year.

Corporate income tax

The corporate income tax rate has been reduced from 28% to 27%. The lower tax will take effect for companies with a tax year ending on or after 31 March 2023.

It will cost the fiscus R2.6 billion this year – but two changes in corporate tax are expected to recoup the loss. One limits interest treatments, specifically on multinationals, and another restricts assessed losses.

Assessed losses brought forward will be limited to 80% of taxable income, which means that companies with an assessed loss balance that matches or exceeds their current-year taxable income will need to pay tax on 20% of their taxable income. Smaller companies with a taxable income below R1 million will be exempt.

Personal income tax

Tax relief has been granted in the adjustment of personal income tax brackets and rebates:

Source: Treasury

As an example, for someone younger than 65, who earns an income of R500 000, their income tax bill will be lowered by around R3 300 a year – or R276 a month.

Source: Treasury

The annual tax-free threshold for a person under the age of 65 will increase to R91 250.

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. 

TAKE A LOOK | Tax calculator: How this year's budget will affect your pocket

Employment tax incentive boost

From 1 March, the employment tax incentive will increase from R1 000 to a maximum of R1 500 per month in the first 12 months and from R500 to a maximum of R750 in the second 12 months.

Fuel levy

Fuel prices have skyrocketed over the past year in South Africa, and petrol looks set to breach the R21/litre mark in March.

In response to this, no increases will be made to the general fuel levy on petrol and diesel, and there will also be no increase in the RAF levy. These changes will ensure that fuel taxes as a percentage of the price of fuel are below 40%, Treasury said.

However, the carbon fuel levy will increase by 1c to 9c/l for petrol and 10c/l for diesel from 6 April 2022.

Sin taxes

After taxes on alcohol were raised by more than 8% last year, this year’s hikes were largely kept in line with inflation, ranging from 5.5% hikes for wine, beer and cigarettes to 6.5% for spirits and sparkling wine.

Source: Treasury

The increases mean that as from this week:

• A 340ml can of beer or cider will cost 11c more;

• A 750ml bottle of wine will be 17c more expensive;

• A bottle of sparkling wine will cost an additional 76c;

• A a bottle of spirits will be R4.83 more expensive;

• A packet of cigarettes will cost an additional R1.03;

• 25g of piped tobacco will cost an extra 37c; and

• A 23g cigar will be R6.77 more expensive.

A new tax on vaping products of at least R2.90 per millilitre will be introduced from 1 January 2023, and a new tax will also be introduced on beer powders.

Sugar tax

The health promotion levy for beverages with more than 4g of sugar content per 100ml will be increased from 2.21c/g to 2.31c/g from 1 April 2022. Consultations will also be initiated to consider lowering the 4g threshold and extending the levy to fruit juices, Treasury said.

Plastic bag levy

Plastic bag levy is increased by 3 cents to 28 cents per bag from 1 April 202

An upstream plastic tax and a tax on single-use plastics will be investigated. 

Light bulb tax

The incandescent light bulb levy will be increased from R10 to R15 per light bulb from 1 April 2022. 

Carbon tax rate

The carbon tax rate increased from R134 to R144 per ton of carbon dioxide equivalent, effective from 1 January 2022.

The first phase of the carbon tax, with substantial allowances and electricity price neutrality, will be extended to 31 December 2025. However, in line with SA's commitments at COP26, the carbon tax rate will be progressively increased every year to reach $20 per ton. In the second phase from 2026 onwards, the carbon tax rate will have larger annual increases to reach at least $30 by 2030, and the allowances will rapidly fall away.

"We urge all our companies that have not already done so to develop plans to progressively reduce their emissions over the next 10 years, otherwise they will face these steep taxes," Treasury said.

Government proposes to increase the vehicle emissions tax rate on passenger cars from R120 to R132/gCO2/km and increase the tax on double cabs from R160 to R176/gCO2/km from 1 April 2022.

Change to the super-rich’s tax reporting

To assist with the detection of noncompliance or fraud through the existence of unexplained wealth, all provisional taxpayers with assets above R50 million will be required to declare specified assets and liabilities at market values in their 2023 tax returns. This will help to detect fraud and tax noncompliance of these individuals, Treasury said.

Other future tax proposals include plans for a new personal income tax regime for remote work, as well as a review of the exemption of foreign retirement benefits in domestic tax legislation and a review of depreciation and investment allowances.

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