2012
Budget Update
2012 BUDGET
TAX in SA: Who’s paying what?
• There are 6.2 million individual taxpayers in SA – roughly 12% of the
population
• 102 000 taxpayers earn over R1 million (roughly 0.2% of the population)
• 4.8 million taxpayers earn less than R60 000 per annum
• Most tax is collected from taxpayers in the R260 000 – R600 000 income
bracket.
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Main Tax Proposals
• Personal income tax relief of R9.5 billion
(2011: R8.1 billion)
• Implementing the dividend withholding
tax at 15%
• An increase in effective capital gains tax
rates
• Reforms to the tax treatment of
contributions to retirement savings
• Further reforms to the tax treatment of
medical scheme contributions
• Tax preferred savings and investment
vehicles for individuals are to be
introduced
• Relief for micro and small businesses
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Tax Tables - Individuals
2012/2013
2011/2012
Taxable Income (R)
Rate of Tax (R)
Taxable Income (R)
Rate of Tax (R)
0 - 160,000
18%
0 - 150,000
18%
160,001 - 250,000
28,800 + 25%
150,001 - 235,000
27,000 + 25%
250,001 - 346,000
51,300 + 30%
235,001 - 325,000
48,250 + 30%
346,001 - 484,000
80,100 + 35%
325,001 - 455,000
75,250 + 35%
484,001 - 617,000
128,400 + 38%
455,001 - 580,000
120,750 + 38%
617,001 and above
178,940 + 40%
580,001 and above
168,250 + 40%
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5
Rebates
Rebates for natural
persons
Under 65 – Primary
65 and over – Secondary
75 and over - Tertiary
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2013
2012
(R)
(R)
11 440
6 390
2 130
10 755
6 012
2 000
Tax Thresholds
Under 65
65 to 74
75 and over
2013
(R)
2012
(R)
63 556
99 056
110 889
59 750
93 150
104 261
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Interest and Taxable Dividend Exemption
2013
(R)
2012
(R)
Under 65
22 800
22 800
Over 65
33 000
33 000
Foreign
deleted
3 700
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8
Capital Gains Tax Exclusions
Annual Exclusion
Annual exclusion in year of death –
gains and losses
Disposal of small business by natural
person if over age 55
Max market value of assets to qualify
as a small business
2013
2012
(R)
(R)
30 000
20 000
300 000
200 000
1 800 000
900 000
10mill
5mill
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9
Capital Gains Tax Exclusions
Primary Residence
Exclusion
2013
2012
(R)
(R)
2,0 m
1,5 m
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10
Capital Gains Tax Effective Rates
Disposals after 1 March 2012
Taxpayer
Inclusion
Statutory
Effective
Effective Rate
Rate (%)
Rate (%)
Rate (%)
including
Dividends Tax
Individuals
33.3
0 – 40
0 – 13.32
Special
33.3
0 – 40
0 – 13.32
Other
66.6
40
26.64
Ordinary
66.6
28
18.65
30.85
Small business corporation
66.6
0 – 28
0 – 18.65
0 – 30.85
Employment company
66.6
28
18.65
30.85
66.6
28
18.65
18.65
0
0
0
15% (on
Trusts
Companies
(personal service provider)
Foreign company (SA
branch)
Micro-business
turnover tax
subject
to
distributions over
R200k)
Travel Allowance Deemed Expenditure Table
• Changed with effect from
1 March 2012
–
–
–
New table on following page
Number of bands remain the
same
Limit on cost remains R480k
• Reimbursive travel allowance where
business km’s less than 8 000 p/a
increased from R3,05/km to
R3,16/km
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Travel Allowance Deemed Expenditure Table
Value of the vehicle
(incl. VAT)
Fixed Cost
(R)
Fuel Cost
(c)
Maintenance Cost
(c)
R0 – R60 000
19 492
73.7
25.7
R60 001 – R120 000
38 726
77.6
29.0
R120 001 – R180 000
52 594
81.5
32.3
R180 001 – R240 000
66 440
89.6
36.9
R240 001 – R300 000
79 185
102.7
45.2
R300 001 – R360 000
91 873
117.1
53.7
R360 001 – R420 000
105 809
119.3
65.2
R420 001 – R480 000
119 683
133.6
68.3
Exceeding R480 000
119 683
133.6
68.3
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Retirement Fund Lump Sum
Withdrawal Benefits
2012/2013 rates are unchanged from 2011/2012
Taxable lump sum (R)
Rate of Tax (R)
0 – 22 500
0%
22,501 - 600,000
18%
600,001 - 900,000
103,950 + 27%
900,001 and above
R184,950 + 36%
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Retirement Fund Lump Sum
Benefits on Retirement or Severance
2012/2013 rates are unchanged from 2011/2012
Taxable lump sum (R)
Rate of Tax
(R)
0 – 315 000
0%
315,001 - 630,000
18%
630,001 - 945,000
56,700 + 27%
945,001 and above
141,750 + 36%
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Corporate Tax Rates
Years of assessment ending between 1 April and 31 March
2013
2012
Non-mining companies
28%
28%
Close corporations
28%
28%
Employment companies
28%
33%
Non-resident companies (SA branch)
28%
33%
STC: 10% on net amount of dividends declared before 1 April 2012
even if dividends are paid on or after 1 April 2012
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Dividends Tax
Rate of dividends tax on any dividend declared and paid
on or after 1 April 2012
15%
Amongst others, exemptions • Company which is a resident
• The Government, a provincial administration or a municipality
• Approved PBO
• Pension, provident, RAF, benefit funds and medical schemes
• Registered micro business to the extent total dividends paid
during the y.o.a do not exceed R200 000
Note that transitional period during which STC credits can be used has been
reduced from 5 to 3 years.
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Small Business Corporations
(Years of assessment ending between 1 April and 31 March)
2012/2013
Taxable income
(R)
2011/2012
Rate of Tax (R) Taxable income
(R)
Rate of Tax (R)
0 - 63,556
0%
0 - 59,750
0%
63,557 - 350,000
0 + 7%
59,751 - 300,000
0 + 10%
350,001 and above
20,051 + 28%
300,001 and above
24,025 + 28%
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Subsistence Allowances
Travel in the Republic
•
•
meals and incidental costs: R303
(was R286) per day
incidental costs only: R93 (was
R88) per day
Travel outside the Republic
•
daily amount per country also
changed from 1 March 2012
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Transfer Duty (no change)
Natural and juristic persons - agreement on or after 23 Feb 2011
Property value (R)
Rate of Tax (R)
0 - 600,000
0%
600,001 – 1,000,000
0 + 3%
1,000,001 – 1,500,000
12,000 + 5%
1,500,001 and above
37,000 + 8%
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Sin Taxes
Excise duties increases:
•
•
•
•
•
Cigarettes from R9.74 per pack of
20 cigarettes to R10.32 (6%)
Traditional beer no increase
Beer from 91c to 101c on a 340ml
can (11%)
Wine from R2.32 to R2.50 a litre
(8%)
Sparkling wine from R6.97 to R7.53
a litre (8%)
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National Health Insurance
NHI to be phased in over 14 years beginning in
2012/13
Green paper released in 2011
Detailed discussion in Chapter 6 of budget review
Introduced in phases
•
First 5 years – strengthening the public sector,
pilot projects
•
Funded by general taxes
Considerations for funding longer term
•
Payroll tax (payable by employers)
•
Increase in the VAT rate
•
Surcharge on individual’s taxable income
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Encouraging Savings
Tax preferred savings and investment accounts to be introduced
Target date April 2014
Alternatives to the current exempt portion of interest
Returns in the form of interest, dividends and capital gains will be exempt
Contributions are likely to be limited
• Annual R30 000
• Lifetime R500 000
Look out for discussion document due by May 2012
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Retirement Reforms
Changes to be introduced from 1 March 2014
Employer’s contributions to pension, provident and RA funds will be deemed a taxable benefit
Employee will be allowed a deduction of
•
up to 22,5% if aged below 45 years, or
•
up to 27,5% if aged 45 and over
•
of the higher of employment or taxable income
•
Annual deduction limited to
-
R250 000 if aged below 45 years
-
R300 000 if aged 45 and over
Above deduction will be subject to a minimum annual threshold of R20 000 to encourage higher
saving by low income earners
Non deductible contributions will be carried forward and exempt on withdrawal whether lump
sum or annuity
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Medical Deductions Converted to Medical Tax
Credits
2011 Amendment Act introduced the concept of tax credits in place of tax
deductions
• Conversion to a hybrid system introduced on 1 March 2012
• For under 65’s, credits for contributions to medical aid funds
• In addition for under 65s (including those with disabilities), excess
contributions and medical expenses are eligible for tax deduction
• Age 65 and over – no credits, 100% of contributions and expenses can
be deducted
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Medical Deductions Converted to Medical Tax
Credits (cont.)
Budget proposals announced following
changes -
Monthly medical scheme tax credits from
1 March 2012
• Taxpayer and first dependent – R230
• Each additional dependent – R154
2013 and 2014 will see the hybrid
deduction/tax credit system continue
1 March 2014 conversion of all taxpayers to
tax credit system
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Medical Deductions Converted to Medical Tax
Credits (cont.)
There will be two tax credits:
i) Pre set medical aid contributions credit
ii) Excess contributions + medical expenses will be converted to tax credits
• Regarding (ii):
- Under 65s –amount above 7.5% of TI @ 25%
- Age 65 and older or any age with disability (or with disabled dependent)
can convert @ 33.3%
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Medical Credit and deductions for 2013 (hybrid system): example for
taxpayer under 65 with one dependent
2013 Year of Assessment
Taxable Income
800 000
Medical Deduction
Medical expenses: R60,000
Medical contributions greater than
4 x MSFTC: R5,000
Total qualifying expenses = R65,000
Less 7.5% of 800 000
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(5 000)
Taxable Income
795 000
Tax (per tables)
250 140
Primary Tax Rebate
(11 440)
MSFTC (230 x 2) * 12
(5 520)
TOTAL TAX DUE
233 180
Medical Deductions Converted to Medical Tax Credits – example for
taxpayer under 65 with one dependent
2015 Year of Assessment
Taxable Income
800 000
Medical Deduction
N/A
Taxable Income
800 000
Tax (per tables)
252 140
Primary Tax Rebate
(11 440)
MSFTC (230 x 2) * 12
(5 520)
Medical Expenditure Tax Credits
Medical Aid contributions greater
than 4 x MSFTC = R5,000
Other Medical Expenditure R60,000
Tax Credit: (R65,000 less 7.5% of
taxable income) x 25%
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TAX DUE
29
(1 250)
233 930
Gambling
• Proposal in 2011 budget has been
changed
• Now a national gambling tax on
gross gambling revenue
• Effective 1 April 2013
• Additional 1% national levy on the
provincial gambling tax base
• Similar tax base will be used to tax
the national lottery
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Business Taxes
Limiting excessive debt in businesses
• Rules to deeming certain debt to be shares
• 2013 consider ‘across-the-board’ % ceiling on interest deductions
relating to EBITDA
Special economic zones
• Build on the IDZ policy
• Focused support for businesses – reduction in tax rate, exemption for
operators, additional deduction for low level employees
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International Tax
Rationalisation of withholding tax on foreign
payments
• Royalties withholding in place
• Interest from 1 Jan 2013
• Dividends from 1 April 2012
• Co-ordinate procedures, rates and timing
for withholding
• Uniform 15% proposed
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Taxation of Luxury Goods
Effective 1 October 2012
Ad valorem tax
• Aeroplanes and helicopters
with mass between 450kg
and 5 000kg – 7%
• Motorboats and sailboats
longer than 10m – 10%
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Debt used to fund share acquisitions
It has been proposed that, given the
acceptance of s45 as an indirect
share acquisition tool, that the use of
debt to directly acquire controlling
share interests of at least 70% be
allowed.
The interest associated with this form
of debt will be subject to the same
controls as those applied to s45.
It is further proposed that that an
offshore section 45 provision be
introduced.
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Miscellaneous
False job terminations
• Resign in order to get access to
retirement funds and immediately
thereafter rehired, no longer permissible
Value of fringe benefits
• A formula is currently prescribed in
some cases. Where the employer can
determine or obtain the actual cost of
providing the benefit, actual cost should
be allowed to be used. E.g. Actual
business vs. private mileage for a
company car and a rental car provided
to an employee
35
Miscellaneous
Learnership allowances
• Requirement to have registered the
learner in order to qualify for the
deduction will be re-examined. Delays
in registration will no longer
negatively impact the allowances
Debt cancellation and restructuring
• In light of weak economic climate, tax
consequences will be investigated
36
Miscellaneous
Company law reform
• New Co’s Act provisions will be
reviewed to consider whether the tax
reorganisation provisions need
updating
Taxing of Government Grants
• Unless specifically exempt, grants are
taxable. A review of which grants
should be exempt is being undertaken
and an explicit list will be published
37
Miscellaneous
Share issue mismatch
• Concern that this is being used to shift value. Value of shares issued in excess of
consideration received will become taxable
Step 1: A - 100
shares, R100
Step 2: B - 100
shares, R1million
Company
1. A’s shares worth R1 each
2. A’s shares worth R1,000,100 / 200
= R5,000 each
38
Miscellaneous
UDZ incentive (13quat)
• Set to expire in 2014, extension will be
considered and in addition qualifying date is
currently date buildings are brought into
use, consideration will be given to change
this to date of initial construction
South African investment into Africa
• H Co often funds foreign Subco by way of
loans. Transfer pricing is an issue if these
loans are interest free. Consideration to be
given to treating these loans as share
capital.
39
Miscellaneous
Clarification of the date of liability for VAT registration
• On date of reaching compulsory registration threshold vendor has 21 days to apply
for registration. Vat cannot be charged on supplies until registered as a vendor
with SARS. Transition rules will be clarified to streamline transition from nonvendor to vendor
40
Miscellaneous
Incentives for the construction of affordable
housing
• Developers and employers may get a credit
or deduction to incentivize the building of
housing units for sale below R300 000 per
dwelling.
Carbons Emissions Tax
• Government will release a draft policy paper
for comment in 2012 which will set out the
concept design for carbon tax in South Africa.
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Miscellaneous
Removal of the proposed passive holding company regime
• Dividends tax at a rate of 15% greatly reduces the government’s concern over
potential arbitrage between different tax rates.
Share block conversions to sectional title
• It is proposed that these conversions receive tax-free rollover treatment
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Miscellaneous
Local Managers of foreign funds
• It is proposed that a ‘carve out’ be created for foreign investment funds which
receive advice from investment managers in SA. This would prevent such funds
from inadvertently being effectively managed in SA and therefore taxed in SA
on their world wide income.
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Miscellaneous
Tax policy projects for 2012/13
• Reforms to the primary, secondary
and tertiary rebates in the context of
a review of the means testing for the
old age grant with the intention of
introducing a child and/or dependant
tax rebate/credit
• Taxation of income from capital
(interest, dividends, capital gains
and rental) to be reviewed to ensure
greater equity and minimise
opportunity for arbitrage
• Taxation of financial instruments
(including derivatives)
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Thank you for attending.
BDO would like to acknowledge and thank FASSET for the
use of certain of these slides.