South Africa: Tax provisions in budget 2021

South Africa: Tax provisions in budget 2021

The budget for 2021 was presented on 24 February 2021.

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Some of the key tax proposals outlined in the budget include:

  • A reduction of the corporate tax rate to 27% for years of assessment beginning on or after 1 April 2022
  • Reduced tax incentives such as a limitation on interest deductions and fewer assessed loss offsets in future
  • Adjusted-for-inflation individual (personal) income tax brackets
  • Revised definition of “employee” for purposes of the employment tax incentive
  • Changes to tax treatment of retirement plans or funds to be tax-free in cases of early retirement
  • Measures concerning the taxation of trusts and deceased estates
  • Clarification of definition of contributed tax capital (CTC) so that shareholders within the same class of shares are to share equally in the allocation of CTC
  • Debt reduction or debt relief rules, to determine that the definition of “interest” be included in the debt reduction rules to clarify its exclusion
  • Amended hybrid debt anti-avoidance rules to address the potential for economic double taxation of returns paid on such hybrid debt instruments
  • Technical amendments to the corporate reorganisation rules to address certain anomalies
  • Clarified tax treatment of the transfer of a policy or insurance book of business between short‐term insurers
  • A revised expense deduction formula for the taxable policyholders of a long-term insurer to include the aggregation of unrealised gains and losses
  • Introduction of rules governing the tax consequences of a deposit insurance scheme
  • Amended controlled foreign company (CFC) anti-diversionary rules to curb circumvention of these rules by taxpayers
  • A unilateral approach to the taxation of digital services providers if a multilateral approach fails
  • Various changes under value added tax (VAT) measures
  • Provisions concerning tax compliance and administration including three-year statute of limitations for refunds of dividends tax 
  • Venture capital company tax incentive to end 30 June 2021, but extensions of the Urban Development Zone incentive and the Learnership tax incentive
  • Increased rate of carbon tax
  • Customs and excise tax (duties) measures

Read a February 2021 report prepared by the KPMG member firm in South Africa 

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