South Africa – Budget 2022 Delivered

Tax Measures/Proposals Affecting Individuals, Including Globally-Mobile Employees

As relates to individual taxpayers and expatriate employees, the proposals for the tax year commencing 1 March 2022 include:

• The maximum tax rate for natural persons remains 45 percent (see Appendix A for the tax table). There is inflationary relief through a 4.5-percent adjustment in the personal income tax brackets and rebates.²
• When a natural person ceases to be tax resident in South Africa (usually upon exiting South Africa permanently), that taxpayer effectively has two assessment periods in the same 12 months of the tax year.  Treasury has proposed that apportionment of the interest income and capital gains tax annual exclusions be required when a person ceases to be tax resident.
• Retirement reforms continue as relates to the “two-pot system” proposed for retirement savings vehicles.  This proposed approach will allow pre-retirement access to a portion of one’s retirement assets, ensuring that the remainder is preserved for retirement. Legislative amendments will follow subsequent to public workshops being held.
• Medical tax credits have increased from ZAR 332 to ZAR 347 per month for the first two members and ZAR 224 to ZAR 234 per month for additional members of the medical aid.
• Certain double taxation agreements (DTAs) provide tax relief from South African tax in relation to South African retirement savings vehicles for residents of other countries. South Africa will revisit the applicable DTAs during this year, so as to retain South African taxing rights in respect of South African retirements funds.
• No wealth tax was announced, however there are clear indications that Treasury is collecting data to assess the viability of the introduction of a wealth tax.
• Provisional taxpayers with business interests are currently required to declare their assets (based on their acquisition values) and liabilities in their tax returns each year.  It is proposed that all provisional taxpayers with assets above ZAR 50 million be required to declared specific assets and liabilities at market values in their 2023 tax returns. The 2023 tax returns will be due from July 2023. 

KPMG NOTE

It will be interesting to understand how broadly SARS intends to apply the concept of “business interests.”

Employment Taxes

• Section 7B of the Income Tax Act. No 58 of 1962 (as amended) provides guidance on the timing of the taxation of variable remuneration such as commissions or bonuses. This section does not presently address the informal sector (generally smaller, start-up businesses and entrepreneurs), where “commission” is determined without reference to a percentage of earnings. Changes to section 7B are on the horizon to cater for these types of performance-based variable payments.
• The Employment Tax Incentive (ETI) is being expanded from 1 March 2022 to increase the maximum monthly value from ZAR 1,000 per month to R1500 per month for the first 12-month period and from a maximum of ZAR 500 to ZAR 750 in the second 12 months of eligibility.

Next Steps

Further consultation and technical discussion papers are expected in relation to a number of the proposals.  Rates changes and specific measures identified will become effective on 1 March 2022, with some changes being brought in later in the year, and specific implementation dates to be confirmed. Certain areas will require longer consultation periods than others and are earmarked for implementation in 2023.

A Draft Taxation Laws Amendment Bill will be released in March 2022 containing further details of these measures/proposals. Final Amendment Acts will be introduced and passed by Parliament later in the year.

APPENDIX A

Tax payable by individuals for the tax year 1 March 2022 to 28 February 2023

Contacts