The Minister of Finance announced amendments to tax and other legislation that may affect investors. These changes are discussed in detail below and, unless otherwise indicated, will come into effect on 1 March 2017.
Individuals and special trusts
A new top bracket has been introduced for personal income tax – individuals’ taxable income above R1.5 million per year will be taxed at 45%. Previously, the top bracket of 41% was set at R701 301. The new top marginal income tax bracket is accompanied by partial relief for bracket creep. The personal income tax rates for the 2017/2018 tax year are listed below.
|Taxable income||Tax rate|
|0 - R189 880||18% of taxable income|
|R189 881 - R296 540||R34 178 + 26% of taxable income above R189 880|
|R296 541 - R410 460||R61 910 + 31% of taxable income above R296 540|
|R410 461 - R555 600||R97 225 + 36% of taxable income above R410 460|
|R555 601 - R708 310||R149 475 + 39% of taxable income above R555 600|
|R708 311 - R1 500 000||R209 032 + 39% of taxable income above R708 310|
|R1 500 001 and above||R533 625+ 45% of taxable income above R1 500 000|
Companies and trusts
The income tax rate for companies has remained unchanged at 28%, while the income tax rate for trusts (other than special trusts) has increased to 45%.
Tax thresholds have increased to:
- R75 750 for taxpayers younger than 65
- R117 300 for taxpayers aged 65 to below 75
- R131 150 for taxpayers aged 75 and older
The primary rebate (deductible from tax payable) has increased to R13 635 per year for all individuals.
The secondary and tertiary rebates have increased to:
- R7 479 for taxpayers aged 65 and older
- R2 493 for taxpayers aged 75 and older
Interest exemptions have remain unchanged at:
- R23 800 per annum for individuals younger than 65 year
- R34 500 per annum for individuals 65 years and older
Medical tax credits
Monthly tax credits for medical scheme contributions will increase from:
- R286 to R303 per month for the person who pays the contributions and the first dependant on the medical scheme
- R192 to R204 per month for each additional dependant
Interest withholding tax (IWT) and Dividend witholding tax (DWT)
Interest Withholding Tax (IWT) on interest from a South African source payable to non-residents has remained unchanged at 15%. Interest is exempt if payable by any sphere of the South African government, a bank or if the debt is listed on a recognised exchange.
Dividend Withholding Tax (DWT) on dividends paid by resident companies and by non-resident companies for shares listed on the JSE has
increased from 15% to 20%, effective 22 February 2017. The exemption and rates for inbound foreign dividends have also been adjusted in
line with the new local DWT rate, resulting in a maximum effective rate of 20%.
Tax-Free Savings Accounts
The annual limit on contributions to tax-free savings accounts has increased from R30 000 to R33 000.
Retirement lump sum taxation
The retirement lump sum tax table is unchanged. The table below illustrates how retirement lump sums will be taxed.
|Taxable Lump Sum||Tax Rate|
|R0 - R500 000||0% of taxable income|
|R500 001 - R700 000||18% of taxable income above R500 000|
|R700 001 - R1 050 000||R36 000 + 27% of taxable income above R700 000|
|R1 050 001 and above||R130 500 + 36% of taxable income above R1 050 000|
The pre-retirement lump sum withdrawal tax table is unchanged. The table below illustrates how lump sum withdrawals will be taxed.
|Taxable Lump Sum||Tax Rate|
|0 - R25 000||0% of taxable income|
|R25 001 - R660 000||18% of taxable income above R25 000|
|R660 001 - R990 000||R114 300+ 27% of taxable income above R660 000|
|R990 001 and above||R203 400 + 36% of taxable income above R990 000|
Capital gains tax (CGT)
The capital gains tax inclusion rate for individuals and special trusts is unchanged at 40%, and for other taxpayers at 80%. The table below
illustrates the effective tax rates for individuals, companies and trusts.
|Investor||Maximum effective tax rate|
|Individuals and special trusts||0% - 18%|
The annual exclusion for a capital gain or loss granted to individuals and special trusts is unchanged at R40 000.
Value-added Tax (VAT)
VAT is unchanged at 14% on the supply of goods and services provided by registered vendors. Government will look to expand the VAT base
in 2018/2019. This will be subject to consultation leading up to the 2018 Budget.