By AH Davey, Anchor Capital
The maximum marginal rate for natural persons remains at 45% and is reached when taxable income exceeds R1,656,600 (previously R1,577,300).
The minimum rate of tax remains at 18% on taxable income not exceeding R216,200 (previously R205,900).
The primary rebate for all natural persons has been increased to R15,714 (previously R14 958). The additional rebate for persons aged 65 years and older is increased to R8,613 (previously R8,199). Persons aged 75 and older are granted a further R2,871 (previously R2 736).
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 remains at R36,000 per tax year.
Local dividends tax remains at a flat 20% rate which was effective 22 February 2017.
Foreign dividends also remain effectively 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.
The Section 10(1)(o)(ii) exemption for foreign employment income of tax residents effective 1 March 2020 remains at R1,25 million.
Withholding tax on interest from a RSA source payable to a non-resident is imposed at a flat rate of 15%. This may be reduced in terms of Double Tax Treaties.
2. COMPANIES AND CLOSE CORPORATIONS
The rate of normal tax remains at 28%.
The final withholding dividend tax remains at a flat rate of 20%.
Tax Exempt bodies (e.g. Retirement Funds) will suffer no withholding tax upon production of a tax exemption certificate.
The flat rate remains at 45%, although distributions in the same tax year are taxed instead in the beneficiaries hands.
4. INDIVIDUAL TAX THRESHOLDS
Liability for tax is as follows:
Under 65 years: R 87,300 (previously R 83,100)
65 to 74 years: R135,150 (previously R128,650)
75 years and older: R151,100 (previously R143,850)
INCOME TAX: INDIVIDUALS AND SPECIAL TRUSTS (The table remains as before)
Taxable income (R) Rates of tax
1 – 216,200 18% of taxable income
216,201 – 337,800 R 38,916 + 26% of taxable income above R 216,200
337,801 – 467,500 R 70,532 + 31% of taxable income above R 337,800
467,500 – 613,600 R110,739 + 36% of taxable income above R 467,500
613,601 – 782,200 R163,335 + 39% of taxable income above R 613,000
782,200 – 1,656,600 R229,089 + 41% of taxable income above R 782,200
1,656,601 and above R587,593 + 45% of taxable income above R1,656,600
TRUSTS OTHER THAN SPECIAL TRUSTS – RATE OF TAX – 45%
Primary R15,714 (previously R14,958)
Secondary (Age 65 and over) R 8,613 (previously R 8,199)
Plus (Age 75 and over) R 2,871 (previously R 2,736)
5. ESTATE DUTY AND DONATIONS TAX
The rate of estate duty and donations tax remains at 20% for dutiable estate amounts of R30 million or less and increases to 25% for dutiable estate amounts over R30 million.
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.
There is a similar treatment of Donations Tax namely 20% for donations of R30 million or less and increases to 25% for donations over R30 million.
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.
6. CAPITAL GAINS TAX (CGT)
- The annual capital gain exclusion for individuals 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.
7. TRANSFER DUTY
The rates remain, i.e. property costing less than R1 000 000 will attract no duty. A 3 percent rate applies between R1 000 000 and R1,375 million, 6 per cent between R1,375 million and R1,925 million, 8 percent between R1,925 million and R2,475 million, 11 percent between R2,475 million and R11 million and 13 percent thereafter.
8. 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 deduction 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.
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 2021 when annuitisation also applies, subject to certain vested benefits. The threshold below which a full fund benefit from a Pension or RA is allowed to be commuted is R247 500.
- 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 R332 for each of the taxpayer and the first dependant on the medical scheme and R224 for each additional dependant.
- 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).
The rate remains at 15%. The compulsory VAT registration threshold remains at R1 million turnover per twelve month period.
11. 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.
12. VOLUNTARY DISCLOSURE PROGRAM
Taxpayers who have undisclosed income whether local or foreign, may avail themselves of the permanent normal SARS Voluntary Disclosure Program (VDP) contained in the Tax Administration Act, in order to mitigate penalties.
As regards unauthorised foreign assets, a person may approach the SA Reserve Bank (SARB) for post SVDP regularisation and each case is considered on its own merits.