A balanced budget for trying times - Deloitte commentary on South Africa Budget 2022/23
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A balanced budget for trying times Deloitte commentary on South Africa Budget 2022/23 Making an impact that matters
“The President reminded us
that even as we face steep and
daunting challenges, like
we have done in the past, we
will overcome... [nevertheless]
Our economic recovery has been
uneven and risks remain high.
We must proceed with caution.”
Minister of Finance
Mr Enoch Godongwana, 23 February 2022
2Foreword
A balanced budget for trying times
Although there is rising debt, the minister draft legislation are proceeding.
indicated that we now expect to realise • No increases to the general fuel levy or
a primary fiscal surplus – where revenue the Road Accident Fund levy. However,
exceeds non-interest expenditure – by the carbon fuel levy will increase by 1c
2023/24. He provided additional context that to 9c per litre for petrol, and 10c per litre
we are bringing debt down for the first time for diesel, from 6 April 2022.
since 2015 as we are reducing the borrowing • The corporate income tax rate
requirement, over the next three years, by reduction to 27%, for companies with
R267.3 billion. years of assessment ending on or
after 31 March 2023, was confirmed.
Also positive is that government now This rate decrease was enabled by the
projects to collect R1.55 trillion in taxes new rules relating to the limitation of
during 2021/22, R62 billion more than assessed losses and by reducing certain
projected at the time of the MTBPS and R182 incentives.
billion more than expected at the start of • It was confirmed that, as regards base
Bernadette Abbott, the year. This appears to be due to a windfall erosion and profit shifting, South Africa
Chief Operating Officer, Africa Tax & Legal from the commodities boom and the intends introducing the Organisation
Commissioner of the South African Revenue for Economic Co-operation and
Service (SARS) indicated that we will likely Development’s two pillar solution by
South Africa has had a trying two years, but not be able to bank on this going forward. It 2023. This is an ambitious target as
today Finance Minister Enoch Godongwana is clear that SARS’ goal of boosting capacity, implementing these new measures
presented a budget with a surprising and intensifying their work to counter will require the signing of multilateral
amount of good news in it. However, this criminal and illicit activity, has also made a international treaties as well as a
good news needs to be tempered with the difference. significant re-engineering of domestic
current economic situation, which remains tax laws.
challenging. As the minister said, quoting From a tax policy perspective, the Finance • The multi-year customs infrastructure
Shakespeare, “One swallow does not a Minister indicated that government was modernisation programme is
summer make”. focussing on broadening the tax base underway, with an initial focus on
rather than increasing the major revenue digitising border operations, notably
The improved revenue performance the generating taxes. including Beitbridge.
minister spoke of is not a reflection of a • Regarding carbon tax, the good news
structural improvement in the economy. The following is a summary of some is that phase 1, which provides various
South Africa’s economy is expected to grow significant tax aspects: allowances to reduce taxable emissions,
at 2.1% in 2022 and average 1.8% over the has been extended to 31 December
three years 2022-2024. This growth rate • An inflationary 4.5% adjustment to 2025. But the bad news is that, after this
is below the rate required to meet South personal income brackets to avoid fiscal date, the rates will increase substantially
Africa’s needs. drag. to around US$20 a tonne by 2026
• Taxes have been increased for alcohol and will continue to increase rapidly
South Africa faced a consolidated Budget and tobacco (by between 4.5% and thereafter.
deficit of 10% of GDP in 2020/21. This is 6.5%). • The energy efficiency incentive has
expected to improve to 5.7% of GDP in • SARS is setting up a high-wealth- been extended to 31 December 2025.
2021/22, 6% of GDP in 2022/23 and 4.2% of individuals department. • The research and development
GDP in 2024/25. However, government debt • Provisional taxpayers with business deduction has also been extended to 31
has reached R4.3 trillion and is projected interests and assets above R50 million December 2023.
to rise to R5.4 trillion over the medium will be required to disclose specified
term. Gross debt will peak at about 75.1% assets and liabilities at market value in This was a very positive budget speech for
of GDP in the 2024/25 fiscal year. The cost the 2023 tax return. Minister Godongwana and we commend
of servicing South Africa’s debt has now • Changes have been proposed to his commitment to the reconstruction and
reached greater levels than each of policing, retirement funds to allow earlier access recovery of the economy; saving lives and
basic education and health. to a portion of the funds through a restoring livelihoods, as well as securing the
“two-pot” system. Consultations on long-term prosperity of South Africa.
3
Budget 2022/23 | Deloitte CommentaryEconomic outlook
The journey to economic recovery continues…
South Africa has been stuck in a low growth With a limited toolset to stimulate growth, a and other key barriers to doing business.
rut for several years. With growth being faster growing economy will be dependent In the face of low growth rates projected in
restrained by long-standing obstacles on meaningful progress on productivity- the medium term, Minister Godongwana
such as inadequate electricity supply, enhancing structural reforms in key sectors rightfully noted that “we do not aspire to
high unemployment (further fuelled by (electricity, communication, transport) be a below 2% growth economy” and that
pandemic-induced job-losses), a growing as well as building business and investor as an emerging market, South Africa's
debt-to-GDP ratio and other structural confidence through addressing uncertainty economic potential is so much greater.
impediments, staging a sustained post-
pandemic economic recovery is by no
means an easy task. “As we face steep and
daunting challenges as in the past, we will
overcome”, stated Finance Minister Enoch Real GDP growth and projections, % (2018 – 2024f)
Godongwana as he proceeded to read his
2022 Budget Speech.
6
After recording a sharp growth plunge 4.8
in 2020 on account of the effects of the 4
COVID-19 pandemic, the South African
2.1
economy bounced back by 4.8% real GDP 1.7
2
growth in 2021. The strong bounce back 1.5 1.6
of 2021 however is a temporary spike, 0.1
0
partially a result of base effects, strong
commodity prices and the gradual opening
%
of the economy. -2
Economic growth is projected to moderate -4
to 2.1% in 2022 with the country expected
to return to pre-pandemic levels of -6
production that same year. Economic -6.4
expansion will moderate further to 1.6%
-8
and 1.7% in 2023 and 2024, respectively, in
the absence of addressing the above-noted 2018 2019 2020 2021e 2022f 2023f 2024f
long-standing structural impediments to
Source: National Treasury, 2022
growth. Notably, Minister Godongwana
emphasised that “our economic recovery
and risk remain high and we must proceed
with caution.”
4
Budget 2022/23 | Deloitte CommentaryAlthough South Africa’s public finances as basic services. As the fastest-growing South Africa’s ongoing struggle with
continue to be strained, the minister spending item (10.7% on average over unemployment and a narrowing tax base
outlined Treasury’s continued commitment the medium term) and one of the highest continues to place mounting pressure on
to a path of fiscal consolidation, including allocated items in government spending, taxpayers. The minister acknowledged
stabilising the gross debt-to-GDP ratio. debt service costs are expected to reach R1 that households are under financial
In the absence of accelerated rates trillion over the period 2022/23 – 2024/25. pressure, and announced R5.2 billion
of economic growth in the short to Learning and culture as well as social in tax relief in support of the country’s
medium term, stabilising debt requires development have been allocated similar economic recovery. In addition, the
key measures to be put in place, such as portions of R1.3 trillion and acceleration of infrastructure development
narrowing the budget deficit and curbing R1 trillion, respectively. While the debt is also expected to unlock employment
government spending growth. burden remains a notable concern, opportunities and help curb the country’s
Minister Godongwana outlined that for struggle with unemployment.
A primary surplus is expected by 2023/24, the first time in 15 years South Africa is
and the consolidated budget deficit is reducing its borrowing requirements. The minister further emphasised that the
forecast to narrow from 6% in 2022/23 Economic Reconstruction and Recovery
to 4.2% of GDP in 2024/25. Higher tax Also, with more R308 billion having been Plan remains essential to the reversal of the
revenues in the current period (compared allocated towards bailing out failing state- country’s decade-long growth stagnation,
with the 2021 Budget estimates) have owned companies (SOCs) in the past, particularly the implementation of
directly supported the current year deficit the minister noted plans to apply “tough productivity-enhancing structural reforms
reduction. Although the gross debt-to-GDP love” on struggling SOCs and redirect in key network industries.
ratio has deteriorated significantly since such spending to other functions given
2019 due to spending increases during the government’s focus of restoring the health Accelerating the government’s economic
pandemic, this is now expected to reach of public finances. reform agenda, which includes improving
72.8% in 2022/23 and stabilise in 2024/25 electricity supply and spearheading
at 75.1% of GDP (or R5.43 trillion). Although South Africa’s tax revenue infrastructure investment through public-
performance was on the upside, bolstered private partnerships, is much needed to
Debt-service costs continue to push aside by commodity prices, the economy’s stimulate demand, support a sustained
other crucial areas for spending, such productive capacity remains unchanged. economic recovery, and to unlock
the country’s economic potential and
competitiveness. To drive these reforms,
progress on infrastructure plans were
Gross debt-to-GDP outlook (2018/19-2029/30)
highlighted in the Budget, with a public
sector infrastructure spending allocation of
R812.5 billion over the next three years.
77.8 78.1 77.8 77.3
80.0 76.8 76.5
74.7 75.2 While the pace of reform has been slow
75.0 and uneven to date, increasing emphasis
70.7 69.9 75.1 75.0
74.4 74.3 of the Budget in support of wide-ranging
72.8 73.4
70.0 72.0 structural reforms, as well as gains
69.5 70.2 achieved, coupled with new infrastructure
% of GDP
65.0 investment and support for small
businesses, will set the stage for building
60.0 investor confidence, a sustained recovery
and higher future growth rates over the
57.4 long term.
55.0
51.5
50.0 As the country continues on its long
journey to recovery, more work still needs
2020/21
2022/23
2024/25
2023/24
2028/29
2029/30
2025/26
2026/27
2021/22
2027/28
2019/20
2018/19
to be done. “You won't realise the distance
you have walked, until you look around and
realise how far you have been.”
2022 Budget 2021 MTBPS
Source: National Treasury, 2022
5
Budget 2022/23 | Deloitte CommentaryTax policy proposals
Overview recommendations and is now aligning South African tax could be levied on the
Government’s stated policy is to raise the outstanding recommendations with pension ultimately payable. Hence the
revenue in an equitable, efficient, and those of the State Capture Commission. A proposed amendment. As a result of
sustainable manner to support South discussion document as well as proposed consultations undertaken regarding last
Africa’s development objectives. It hopes legislative amendments regarding the year’s proposed change it now appears
to achieve this by broadening the tax base, broader governance and oversight reforms that the proposal has been scrapped
improving administration, and lowering outlined by both commissions will soon be and that instead South Africa is going to
rather than raising tax rates. Government published for public comment. renegotiate its treaties with the foreign
has stated its intention to avoid tax rate jurisdictions in question to ensure that
increases, to the extent possible, and Individuals South Africa retains the taxing rights
subject to major expenditure decisions. • Personal income tax brackets and on the pensions ultimately paid out.
rebates, including the medical rebate, Government intends to initiate these
The 2022 Budget provides R5.2 billion are to be adjusted to compensate for negotiations this year.
in tax relief. Of this amount, R2.2 billion the impact of inflation which is estimated • A discussion paper proposing a “two-pot
is attributable to the expansion of the to be 4.5%. In the absence of any retirement system” was published in
employment tax incentive and R3 billion is adjustment to the brackets and rebates it December 2021. The proposal would
mainly due to no increase to the general is estimated that tax collections would be enable pre-retirement access to a portion
fuel levy and the Road Accident Fund levy. R13.5 billion greater. of one’s retirement assets while ensuring
• Currently, provisional taxpayers with that the remainder is preserved for
From a corporate tax perspective, the business interests are required to provide retirement. Public comments on the tax
restructuring of the corporate income a statement of assets and liabilities in treatment of contributions to the two
tax system (as announced in the 2020 their annual tax returns on a yearly basis. pots are being reviewed in preparation
Budget) is estimated to have no impact on The statement is required to be based for public workshops which will be
corporate tax revenue over the medium on the cost of the assets in question. To followed by legislative amendments.
term – the R2.6 billion reduction in gross collect additional information and to help
tax revenue in 2022/23 as a result of the in determining the levels and structure Corporate tax
reduction in the corporate tax rate to 27% of wealth holdings as recommended by • As announced in the 2020 Budget it is
(see further detail below) is expected to be the Davies Tax Committee, it is proposed proposed to reduce the corporate tax
offset by the additional revenue from the that all provisional taxpayers with assets rate by 1% to 27%. These measures will
base protection and broadening measures above R50 million be required to declare come into effect for years of assessment
such as the restriction of assessed losses specified assets and liabilities at market ending on or after
and additional interest limitations (also values in their 2023 tax returns. 31 March 2023.
discussed in further detail below). • Hand-in-hand with the reduced tax rate
Retirement funds the previously announced proposal to
Government notes that it has progressed • In the 2021 budget, it was proposed further restrict certain deductible interest
the rebuilding of the South African Revenue that on ceasing to be South African for tax purposes will be introduced. In
Service (SARS) and that this is evidenced resident, individuals should be subject addition, the proposal to restrict the use
by improved revenue collection and to capital gains tax on the market value of assessed losses to 80% of taxable
compliance trends. SARS has recruited of their retirement funds. This change income in any one year will also now
additional staff across various levels and was proposed because a number of be implemented. It will however be
areas of expertise and has invested treaties that South Africa had concluded made clear that, with regard to mining
R430 million in refreshing and modernising with foreign countries give the sole companies, the assessed loss limitation
its ICT infrastructure. It further notes taxing rights on any pensions which rule will be applied before determining
that SARS’ dedicated new unit focused are subsequently paid out of these deductible capital expenditure. It is also
on high-net-worth individuals is taking funds to the countries in which the proposed that smaller companies, that
shape and the multi-year customs individuals are resident. This meant that are more likely to struggle with cash
modernisation program is under way, with notwithstanding the tax relief that South flow, will be exempt from the proposed
an initial focus on improving Beitbridge Africa had granted on contributions made changes to the assessed loss provisions.
border operations. SARS has implemented to the retirement fund in question, no
the majority of the Nugent Commission
6
Budget 2022/23 | Deloitte Commentary• Government proposes clarifying that specific share buybacks would be subject Tax incentives
the interest limitation rules in section to dividends tax except if the shareholder Following the publication of a discussion
23M of the Income Tax Act will not be was an exempt entity/person. The document and an online survey reviewing
applied to the interest expense of non- effective date of this amendment has the research and development tax
producing mining operations that forms now been postponed to 1 January 2023 incentive, a decision has been made to
part of capital expenditure of such mining to give National Treasury and affected extend the incentive in its current form
operations (in terms of section 36 of the stakeholders more time to consider the until 31 December 2023. Other incentives,
Income Tax Act). impact of the proposed amendments. as detailed below, will however not be
• South Africa is a member of the • Further refinements to the intra-group renewed when they reach their sunset
Steering Group of the OECD/G20 relief provisions are proposed to date. These include:
Inclusive Framework tasked with limit some of the potential negative
finding consensus-based solutions consequences of the anti-avoidance • Section 12DA (rolling stock) on
to tax challenges associated with the provisions contained in the relief. 28 February 2022
digitalisation of the economy. The • It has come to government's attention • Section 12F (airport and port assets) on
Inclusive Framework agreed on a two- that lay-by arrangements do not benefit 28 February 2022
pillar solution and will work on and from the debtors allowance rules • Section 12O (films), which lapsed on
implementation framework to take contained in section 24 of the Income 31 December 2021
effect by 2023. South Africa will propose Tax Act because such arrangements are • Section 13sept (sale of low-cost residential
legislative amendments to implement for periods shorter than 12 months. To units through an interest free loan) on
these rules once the framework has remedy this, government proposes that 28 February 2022.
been finalised and translated into a local the current debtors allowance rules be
context. reviewed to limit the adverse effect on Employment tax incentive
lay-by arrangements. It is proposed that the employment
Corporate tax – administrative • Certain changes to the income tax tax incentive be increased by 50% to a
amendments provisions dealing with the taxation of maximum monthly value of R1 500 to
Annexure C to the Budget Review details insurers are anticipated in order to deal encourage businesses to increase youth
a number of legislative changes that are with the impact of IFRS17 (effective 1 employment. The proposed change will
under consideration or are proposed January 2023) which may have a material be effective from 1 March 2022. Improved
for the upcoming legislative cycle. These impact on the valuation method for targeting of the incentive will be considered
include: insurance contract liabilities and insurers’ to support jobs for long-term unemployed
cash flow and profit profiles. work seekers, alongside an expansion
• Expanding the definition of “variable • In 2018 amendments were proposed to of the eligibility criteria for qualifying
remuneration” which is only deductible clarify and provide certainty on the tax employees to improve the incentive for
when paid by a business rather than treatment of gains made by collective small businesses.
when expenditure in question is actually investment schemes on the disposal
incurred. of securities. The proposal was to tax Presidential employment initiative
• Apportioning the annual interest short-term gains as income rather than The presidential employment initiative
exemption and capital gains tax annual as capital. The proposal was withdrawn was launched in October 2020 to mitigate
exclusion for tax periods that are less following public comment to allow more the economic impact of COVID-19. A total
than a year. When an individual ceases time to find solutions with the industry. of R12.6 billion allocated for this first
to be resident in South Africa their year It is now proposed to issue a discussion phase of the initiative and R10.9billion
of assessment is deemed to end and a document, dealing with the tax treatment allocated for phase two commencing
new year of assessment commences of amounts received by or accrued October 2021. An amount of R18.4 billion
immediately thereafter. This means that to portfolios of collective investment has now been prioritised for phase three
individuals have two years of assessment schemes, for public comment before any of the presidential employment initiative
in a 12-month period, each of which is amendments are proposed to the tax over the next two years. This budget
entitled to the full interest exemption and legislation. includes the allocation of R1.7 billion to
capital gains tax exclusion. The proposal • A number of amendments are proposed the Social Employment Fund established
seeks to deal with this anomaly. to deal with anomalies and loopholes by the Department of Trade, Industry and
• A number of amendments are proposed relating to the taxation of controlled Competition.
to the retirement provisions to deal with foreign companies.
anomalies that have come to light. • To align the tax treatment of an asset Bounce-back scheme to support SMEs
• The postponing of the effective date of a acquired as a government grant in R20 billion has been allocated to the
2021 proposal to address anti-avoidance kind with the tax treatment of assets new bounce-back scheme to support
concerns and clarify the definition of acquired using a cash government grant, small businesses in distress owing to the
contributed tax capital. As the proposal government proposes that changes be COVID-19 pandemic through a two-fold
was originally framed it would have made to the legislation so that wear and financial support mechanism that will be
precluded the use of contributed tax tear allowances cannot be claimed in introduced sequentially.
capital to buy back specific shares in respect of the former.
a company. This would mean that any
7
Budget 2022/23 | Deloitte CommentaryFirstly, loan guarantees for small Customs and excise – Time of entry for The first phase of the carbon tax will be
businesses of R15 billion will be facilitated break-bulk cargo imported by sea, air extended to 31 December 2025. The
through various financial institutions and rail transitional support measures afforded to
and small medium loan providers, with There is currently no provision in the companies in the first phase (such as the
government support used to guarantee Customs and Excise Act enabling the tax-free allowances) will continue over this
the first 20% of the losses for the loan SARS Commissioner to prescribe the period, alongside adjustments outlined
providers. This support mechanism will be period within which entry must be made below:
operational during March. in respect of loose or break-bulk cargo
imported by sea, air or rail. Government • Extending the energy-efficiency-savings
Secondly, a business equity-linked loan proposes that the act be amended to allow tax incentive from 1 January 2023 to 31
guarantee support mechanism that will be the Commissioner to make rules for the December 2025.
available to qualifying ‘non-bank’ small and entry time of any category of goods, which • Extending the electricity price neutrality
medium finance providers is intended to may include such cargo. commitment until 31 December 2025.
be launched by April and will be facilitated The electricity-related deduction will be
through development finance institutions. Customs and excise – Clarifying the limited to the carbon tax liability of fuel
requirements for invoices in respect of emissions of electricity generators and
VAT – Reviewing section 72 import and export goods will not be offset against the total carbon
arrangements and decisions Because of existing uncertainty, it is tax liability.
In 2019, changes were made to section proposed that amendments be made to • Adjusting the threshold for the maximum
72 of VAT Act, which deals with the SARS the Customs and Excise Act to clarify the trade exposure allowance from 30%
Commissioner's discretion to make legislative requirements for invoices in to 50% from 1 January 2023. Updated
arrangements or decisions regarding respect of import and export goods. The sectors and allowances will be published
the application of the VAT Act to specific amendment is aimed at providing greater for public consultation.
situations where the manner in which a clarity on the invoice requirements with a • Penalising emissions exceeding
vendor or class of vendors conducts their view to encourage greater compliance and mandatory carbon budgets. The
business leads to difficulties, anomalies engender trade facilitation. mandatory carbon budgeting system
or incongruities. In the past two years, comes into effect on 1 January 2023. A
government reviewed the impact of Customs and excise – Progress with proposed higher carbon tax rate of R640
these decisions to ascertain whether they the review of the diesel refund per tonne of carbon dioxide equivalent
should be discontinued or extended in administration will apply to greenhouse gas emissions
accordance with the new provisions of Draft amendments to the diesel refund exceeding the carbon budget. The
section 72. As a result, changes were made notes and rules to the Customs and voluntary carbon budget allowance of
to the VAT legislation. It is proposed that Excise Act were published for public 5% will no longer be applicable. These
further changes be made to account for comment in 2020 and 2021. Industry- amendments will be legislated once the
further reviews of some of the section 72 specific workshops were conducted in the Climate Change Bill is enacted.
decisions. second half of 2021 to refine and finalise
the proposed reforms. Government Simultaneously, South Africa’s exports
VAT – Updating the regulations proposes that legislation effecting these of carbon-intensive goods such as
prescribing electronic services amendments be put forward. iron and steel are likely to face carbon
In 2019 the ambit of the legislation that taxes in Europe, which will reduce their
governs electronic services was widened to Government has previously announced competitiveness.
align it with the Organisation for Economic that it intends including “wet” contracts in
Co-operation and Development (OECD)/ the diesel refund scheme. Hopefully the To prepare South Africa for the structural
Group 20 Base Erosion and Profit Shifting consultative process referred to above transition to a climate-resilient economy,
Action 1 Report. It is proposed that the will ensure that eligible participants enjoy government proposes to progressively
current regulations be reviewed to give the full benefits of the diesel refund increase the carbon price every year by
effect and recognise further developments dispensation. at least US$1 to reach US$20 per tonne
in this area. of carbon dioxide equivalent by 2026. For
Carbon tax the second phase, government intends
Customs and excise – Advance rulings Effective 1 January 2022, the carbon to increase the carbon price more rapidly
It is proposed that an enabling framework tax rate increased from R134 to R144 every year, to at least US$30 by 2030,
for advance rulings be provided for in the per tonne of carbon dioxide equivalent. accelerating to higher levels by 2035, 2040
Customs and Excise Act. Once introduced, Effective 6 April 2022, the carbon fuel levy and up to US$120 beyond 2050.
advance rulings will be binding on both will also increase by 1c/litre for petrol and
SARS and the applicant. The indicative 10c/litre for diesel.
implementation date is 30 November 2022.
8
Budget 2022/23 | Deloitte CommentaryThe basic tax-free allowances will also Health promotion levy • Government proposes that the South
gradually be reduced. To encourage The levy for beverages with more than African domestic legal framework be
investment in carbon offset projects, 4g of sugar content per 100ml will be amended to make provision for the
government intends to increase the carbon increased from 2.21c/g to 2.31c/g from 1 full use of joint audits with other tax
offset allowance by 5% from 1 January April 2022. The Budget Review notes that administrations in order to improve the
2026. These and other proposals will form consultations will be initiated to consider effective exchange of information under
part of a review for the second phase. lowering the 4g threshold and extending international tax agreements.
the levy to fruit juices. • Given the abuse of employment tax
Othertaxes incentives, government proposes that
Plastic bag levy Upstream petroleum tax regime the Employment Tax Incentive Act, 2013
It is proposed that the plastic bag levy One of the key proposals included in the be amended to impose understatement
be increased from 25c/bag to 28c/bag review of the tax regime for the upstream penalties on reimbursements that are
with effect from 1 April 2022. The Budget petroleum industry published at the improperly claimed.
Review also notes that an upstream plastic end of 2021 was the proposal to replace • Taxpayers with outstanding tax debts
tax and a tax on single-use plastics will be the variable mineral and petroleum may make arrangements with SARS that
investigated. resources royalty rate with a flat rate of will allow the latter to reflect their tax
5%. Government has acknowledged that status as being tax compliant, despite
Motor vehicle emissions and incandescent public comments have been received, the outstanding tax debts. The Budget
light bulbs including some concerns raised about Review notes that this may not be
Government proposes an increase to the the aforementioned proposal and that possible in the early stages of a business
vehicle emissions tax rate on passenger it intends hosting a workshop to engage rescue, which may negatively affect
cars from R120 to R132/gCO2/km and stakeholders on the various issues, with a the prospects of a successful rescue.
increase the tax on double cabs from R160 view to including finalised proposals in the Empowering SARS to assist in these
to R176/gCO2/km from 1 April 2022. An 2022 Taxation Laws Amendment Bill. circumstances is to be investigated.
increase in the incandescent light bulb levy • Updates to the tax compliance status
from R10 to R15 per light bulb is proposed Tax administration system is to be investigated to counter
from 1 April 2022. The following tax administrative initiatives the increased abuse of the system and
were noted in the Budget Review: ensure that the system provides a more
Excise duties on alcoholic beverages and accurate reflection of the actual tax
tobacco products • It is proposed that the Income Tax compliance status of taxpayers.
Government proposes to increase excise Act be amended to allow a regulated
duties on alcohol by between 4.5 and 6.5% intermediary to recover refundable Tax research and reviews
for 2022/2023. An increase in the excise dividends tax from SARS in instances • A discussion document will be published
duty rate on tobacco products by between where the refundable amount exceeds in 2022 on a personal income tax regime
5.5 and 6.5% is proposed. the dividends tax withheld by the for remote work.
regulated intermediary at least one year • A review of the exemption of foreign
Beer powders after the amount became refundable. retirement benefits in domestic tax
The Budget Review notes that in the This remedy is currently available to legislation will be conducted.
interest of equity, the flat excise rate of dividend paying companies. • A review of depreciation and investment
34.7c/kg which is currently applying for • Government proposes a review of the allowances will take place during 2022/23,
traditional African beer powder will also provisional tax system with the intention followed by the release of a discussion
apply to other similar beer powders from 1 of publishing a discussion paper on the document.
October 2022. subject. • Government will review the approach to
• In order to prevent unnecessary VAT adjusting thresholds for inflation.
Vaping registrations, costs and administrative • Review papers on the alcohol and
A new flat excise duty rate of at least R2.90/ burden for both non-resident suppliers tobacco excise duties policy framework
ml is proposed to apply from 1 January and SARS, it is proposed that a specific will be released shortly for comment.
2023 to both nicotine and non-nicotine exception be considered to the normal
solutions. compulsory VAT registration in the case of
once-off electronic supplies in excess of
the R1 million VAT registration threshold
made by non-resident suppliers to a
recipient in South Africa.
9
Budget 2022/23 | Deloitte CommentaryExchange control Companies
In line with the policy to modernise the 1. Following public consultation, it has now
capital flows management framework, been decided that all debt securities
further proposals have been made, which referencing foreign assets and listed on
include the following: South African stock exchanges are to
remain classified as foreign.
Individuals 2. The foreign direct investment limit
1. Will be able to export dual listed for companies investing abroad will
domestic securities to a recognised be raised from R1 billion to R5 billion
foreign share exchange provided it subject to tax and reporting conditions
falls within the R1 million discretionary being met.
allowance and/or the R10 million foreign 3. Companies will be able to retain excess
capital allowances available to natural profits and income from their offshore
persons. This will need to be advised branches and offices abroad subject to
to the exchange control authorities fulfilling reporting requirements.
and all tax and money - laundering 4. Parent companies will be able to
requirements will apply. transfer, via their local banks, increased
2. May now use their single discretionary amounts to their domestic treasury
allowance to participate in online foreign management companies for the
exchange trading activities but may purpose of new offshore investments,
not use credit or debit cards for this expansions as well as other transactions
purpose. of a capital nature. The previous limit for
3. May now retain gifts from non-residents listed companies has been raised from
offshore without first seeking approval R2 billion to R5 billion and for unlisted
from the exchange control authorities; entities from R1 billion to R3 billion.
4. May lend or dispose of authorised/
regularised foreign assets to other Institutional investors
South African residents subject to 1. The previous limits of 40 and 30%
local tax disclosure and compliance. respectively applicable to various
This dispensation does not apply institutional investors have now been
retrospectively, and previous consolidated in a new limit of 45%,
transactions of this nature will still including the 10% African allowance, for
require regularisation. all institutional investors.
5. Will now be able to transfer in excess of 2. Institutional investors will now be able
R10 million, for investment purposes, to open and conduct foreign currency
via offshore trusts subject to all the accounts with local banks which are
conditions previously required, i.e. tax authorised dealers. These accounts
clearance from SARS and approval from are to be used for funding purposes
the Financial Surveillance Department of and to receive disinvestment proceeds
the Reserve Bank. from abroad, which are destined to be
6. Remaining cash balances of up to reinvested offshore.
R100 000 of individuals who have
ceased to be resident for tax purposes
will become transferable without the
need for further approval.
10
Budget 2022/23 | Deloitte CommentaryBudget 2021/22 | Deloitte Commentary
Contacts
For more information, contact your nearest Deloitte tax office.
Gauteng: Bernadette Abbott, Chief Operating Officer, Africa Tax & Legal
Mobile: +27 (0)82 781 8435, Email: babbott@deloitte.co.za
KwaZulu-Natal: Mark Freer, Regional Leader, Africa Tax & Legal
Mobile: +27 (0)82 824 8485, Email: mfreer@deloitte.co.za
Western Cape: Anthea Scholtz, Regional Leader, Africa Tax & Legal
Mobilel: +27 (0)82 377 9103, Email: ascholtz@deloitte.co.za
Editorial team
Hannah Marais
Tel: +27 (0)11 304 5463, Email: hmarais@deloitte.co.za
Moray Wilson
Tel: +27 (0)21 427 5515, Email: morwilson@deloitte.co.za
Ruben Johannes
Tel: +27 (0)21 427 5516, Email: rjohannes@deloitte.co.za
www.deloitte.co.za
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