south africa’s finance minister delivers 2018 budget revie · finance minister delivers 2018...
TRANSCRIPT
On 21 February 2018, South Africa’s Minister of Finance, Malusi Gigaba, delivered his 2018 Budget Review.
The key proposals include:• The Value Added Tax (VAT) rate is increased from 14% to 15%. This change is
effective from 1 April 2018.
• Estate Duty is levied on the property of South African (SA) residents and the SA property of nonresidents less allowable deductions. In the past the duty was levied on the value of an estate at a flat rate of 20%. A higher rate of 25% will now apply to estates greater than R30 million (approximately US$2.5 million). This change is effective from 1 March 2018.
• Donations Tax was previously levied at a flat rate of 20%. A higher rate of 25% will now apply to donations greater than R30 million. This change also is effective from 1 March 2018.
• The Minster has approved six special economic zones (Coega, Dube Tradeport, East London, Maluti-a-Phofung, Richards Bay and Saldanha Bay). Qualifying taxpayers operating in these zones will benefit from a reduced corporate rate and will qualify for an employment tax incentive for workers of all ages.
• The Carbon Tax (at a proposed rate of R120 (approximately US$10) per ton of Carbon dioxide) is expected to be implemented from 1 January 2019.
23 February 2018
Global Tax Alert
South Africa’s Finance Minister delivers 2018 Budget Review
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• The Health Promotion Levy (HPL), which taxes sugary beverages, will be implemented from 1 April 2018. In terms of the current legislation, sugary beverages include beverages with both intrinsic and added sugars, including other sweetening matter. 100% fruit juices and most dairy products are excluded and do not attract the HPL. The HPL will be levied at a rate of 2.1c/gram of the sugar content that exceeds 4g/100ml.
• The ad-valorem excise duty rate on luxury goods is increased from 7% to 9%.
• Alcohol and tobacco excise duties will be increased between 6% and 10%.
• Levies on fuel will be increased by 52c per liter.
The corporate income tax rate on companies and trusts (currently 28% and 45% respectively) remains unchanged and there was a below inflation increase in the personal income tax brackets with greater relief for those in the lower income tax brackets.
Additional proposed tax amendments include:• Amending the recently revised debt forgiveness rules to
address any unintended consequences for taxpayers undertaking debt restructuring transactions.
• Amending the recently revised anti-avoidance rules dealing with share buy-back and dividend stripping to address unintended consequences on legitimate transactions and arrangements.
• Refining the rules for debt-financed acquisitions of a controlling interest in an operating company.
• Extending the application of controlled foreign company rules to foreign companies held through foreign trusts and foundations.
• Addressing the abuse of collateral lending arrangements.
• Clarifying the tax treatment of doubtful debts.
• Amending Income Tax and VAT legislation to address cryptocurrency transactions.
• Investigating options to further curb the practice of excessive interest deductions.
• Implementing measures to approve material cross-border transactions involving state-owned entities.
• Repealing the requirement for a person who receives a tax-exempt dividend to submit a return.
• Clarifying that the correction of tax invoices will no longer constitute an offense where the correction relates to rectifying a legitimate error.
In his speech, the Minister also noted that various key SA stakeholders are taking several steps to detect, disrupt and deter illicit financial flows. He further noted that policy measures to deal with transfer pricing and base erosion by multinational companies have been implemented and will continue to be tightened. Taxpayers can therefore expect continued scrutiny from the South African Revenue Service with regards to transfer pricing.
Global Tax Alert 3
For additional information with respect to this Alert, please contact the following:
Ernst & Young Advisory Services (Pty) Ltd., Cape Town• Ide Louw [email protected]
Ernst & Young Advisory Services (Pty) Ltd., Gauteng• Brigitte Keirby-Smith [email protected]
Ernst & Young Advisory Services (Pty) Ltd., Durban• Candice van den Berg [email protected]
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London• Rendani Neluvhalani [email protected]• Byron Thomas [email protected]
Ernst & Young LLP, Pan African Tax Desk, New York• Silke Mattern [email protected]• Dele A. Olaogun [email protected]• Jacob Shipalane [email protected]
Ernst & Young LLP, Pan African Tax Desk, Houston• Elvis Ngwa [email protected]
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