2022 Budget Speech Update

Finance Minister Enoch Godongwana delivered his maiden Budget speech on Wednesday, 23 February. He noted that although the easing of COVID-19-related restrictions supported a return to economic growth in 2021, the country is still under financial pressure and dealing with the effects of the pandemic, rising inflation, increased fuel prices and a series of interest rate increases.

The Minister acknowledged that now is therefore not the time to increase taxes, which would put the economic recovery at risk. The theme of this year’s Budget is “keeping money in the pockets of South Africans”.

What were the key changes?

The key take-outs from this year’s Budget are summarised below:

Inflationary relief through a 4.5% adjustment in the personal income tax brackets and annual tax rebates.

As announced in last year’s Budget, the corporate income tax rate will reduce by 1%, from 28% to 27%, effective for years of assessment ending on or after 31 March 2023.
No increase in the general fuel levy or the Road Accident Fund (RAF) levy.
The monthly benefits for employers under the employment tax incentive will be increased by 50% to R1 500.

Excise duties on alcohol and tobacco will increase by between 4.5% and 6.5%.
The health promotion levy on beverages will be increased by 0.1 cent to 2.31 cents per gram of sugar from 1 April 2022. The plastic bag levy will increase by 3 cents to 28 cents per bag from 1 April 2022.

The following applies for the period from 1 March 2022 to 28 February 2023:

Individuals and special trusts

Personal income tax brackets will be adjusted in line with the expected inflation rate of 4.5% for the 2022/2023 tax year. This relief will mainly impact individuals in the middle-income group. This means that taxpayers earning above R226 000 will fall into the 26% tax bracket. The highest marginal tax rate for individual taxpayers remains unchanged at 45%. The personal income tax rates for the 2022/2023 tax year are listed below;

Tax Thresholds

The tax-free thresholds for personal income taxes will also increase in line with the 4.5% expected inflation rate for the 2022/2023 financial year to the following:

R91 250 for taxpayers younger than 65

R141 250 for taxpayers age 65 to 74

R157 900 for taxpayers age 75 and over.

Rebates

The primary, secondary and tertiary rebates (deductible from tax payable) will increase to the following:

R16 425 per year for all individuals

R9 000 for taxpayers age 65 and over

R2 997 for taxpayers age 75 and over

Medical Tax Credits

Monthly tax credits for medical scheme contributions will increase to the following:

R347 per month per beneficiary for the first two beneficiaries

R234 per month for each additional beneficiary

Companies

The corporate income tax rate will reduce from 28% to 27% for years of assessment ending on or after 31 March 2023.

Capital Gains Tax (CGT)

The capital gains tax inclusion rate for individuals and special trusts remains at 40%, and for other taxpayers at 80%.

The annual exclusion for a capital gain or loss granted to individuals and special trusts remains at R40 000. The exclusion granted to individuals remains at R300 000 in the year of death.

Interest Exemptions

The local interest exemptions remain unchanged:

The exemption on interest earned for individuals younger than 65 years remains R23 800 per annum.

The exemption for individuals 65 years and older remains R34 500 per annum. Foreign interest remains fully taxable.

Dividends Tax

Dividends tax remains at 20% on dividends paid by resident and non-resident companies for shares listed on the JSE. Foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

Interest Withholding Tax for Non-Residents

Interest withholding tax remains at 15% on interest from a South African source payable to non-residents. 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.

Tax-Free Savings Accounts

The annual cap on contributions to tax-free savings accounts remains at R36 000 from 1 March 2022, with the lifetime limit also remaining at R500 000

Retirement Lump Sum Taxation

At retirement The first R500 000 of a retirement lump sum remains tax-free. The table below illustrates how retirement lump sums will be taxed:

Pre-Retirement

The first R25 000 of a pre-retirement lump sum withdrawal remains tax-free. The table below illustrates how withdrawal lump sums will be taxed:

Value-Added Tax (VAT)

VAT is charged on the supply of goods and services provided by registered vendors. It remains at 15%.

Estate Duty

Estate duty is levied on property of residents and South African property of non-residents, less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty.

Donations Tax

Donations tax is payable at a flat rate on the value of property disposed of by donation. It is levied at a flat rate of 20% on the cumulative value of property donated since 1 March 2018 not exceeding R30 million, and at a rate of 25% on the cumulative value of property donated since 1 March 2018 exceeding R30 million. The first R100 000 of property donated in each year by an individual is, however, exempt from donations tax. This amount remains unchanged from last year.

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