While there was no repeat of last year's surprise 1% VAT rate rise, some changes announced in this year's budget may impact South African business operations and employees.
The focus of the 2019 Budget is on improved governance in the Revenue Service (SARS); prioritising the appointment of a permanent Commissioner; reinstating the SARS Large Business Unit and increasing the efficiency of tax collection with the overarching aim of restoring public confidence in SARS. While there were no changes to tax rates in any category, by not adjusting the tax rates to inflation, SARS will generate additional revenue through the phenomenon known as 'bracket creep'.
Following is a summary of key budget changes and 2019-2020 tax rates relevant to South African businesses and their employees. If you need more detail, or help in understanding how this information impacts your operations, get in touch with our local experts.
2019 Budget – the highlights
- By not adjusting the income tax brackets for inflation, the government is expecting to raise R12.8 billion in revenue.
- By not adjusting the medical tax credits, the government will raise R1 billion in revenue.
- Increases in fuel taxes, together with the carbon tax on fuel, will raise R1.3 billion.
- Increases in alcohol and tobacco excise duties will raise revenue of R1 billion.
- Additional VAT zero-rated items (including white bread flour, cake flour and sanitary pads) were introduced on 1 April 2019.
Individual tax rates - applicable from 1 March 2019 to 28 February 2020
|Taxable Income (R)||Rate of Tax (R)|
|0 – 195 850||18% of taxable income|
|195 851 – 305 850||35 253 + 26% of taxable income above 195 850|
|305 851 – 423 300||63 853 + 31% of taxable income above 305 850|
|423 301 – 555 600||100 263 + 36% of taxable income above 423 300|
|555 601 – 708 310||147 891 + 39% of taxable income above 555 600|
|708 311 – 1 500 000||207 448 + 41% of taxable income above 708 310|
|1500 001 and above||532 041 + 45% of taxable income above 1 500 000|
|Secondary (persons 65 and older)||7 794|
|Tertiary (persons 75 and older)||2 601|
Tax thresholds (amount up to which no tax is payable)
|Below age 65||79 000|
|Aged 65 to below||122 300|
|Aged 75 or older||136 750|
Medical tax credits
|Per month (R)||2020||2019|
|For the taxpayer who pays the medical scheme contributions||310||310|
|For the first dependant;||310||310|
|For each additional dependant(s)||209||209|
At retirement lump sums
|Taxable lump sum (R)||Rate of Tax (R)|
|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|
Pre-retirement lump sums
|Taxable lump sum (R)||Rate of Tax (R)|
|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|
Law changes on the horizon
The following legislation changes are expected in the 2020 financial year.
- Amendments to the foreign income tax exemption for South African residents
From 1 March 2020, tax residents who spend more than 183 days working outside of South Africa will be subject to South African taxation on any foreign employment income exceeding R1 million. To avoid double taxation, it is proposed that South African employers be allowed to reduce their monthly PAYE withholding by the amount of foreign taxes withheld on the employment income.
- Retirement reforms
When a member of a retirement fund retires and receives an annuity, any contributions to the retirement fund that were not deducted from the member's taxable income are tax-exempt. However, this exemption does not apply to annuities received from a provident or provident preservation fund. It is proposed that this exemption be extended to provident and provident preservation fund members who receive annuities. If passed, the exemption would apply to contributions made after 1 March 2016.
Talk to us
TMF South Africa has tax, HR and payroll experts based in Cape Town and Johannesburg who can help you to navigate the local rules and regulations. More than simply accountants and processors of payroll, we also provide a wide variety of HR support services. We can:
- draft employee contracts
- create general ledger interface files
- securely distribute payslip and tax certificates
- provide bespoke interface integration
- manage the online exchange of data in a common format
- take care of leave management and reporting.
Need more information? Contact us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.