South Africa: Measures in budget 2022 concerning individual taxation and employment taxes

Measures concerning individual taxation and employment taxes

Individual taxation and employment taxes

The South African Finance Minister on 23 February 2022 delivered the budget speech that includes measures concerning individual taxation and employment taxes.

Individuals tax and expatriate employee considerations

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

  • The maximum tax rate for natural persons would remain 45%, with certain inflationary relief provided through a 4.5 % adjustment in the individual (personal) income tax brackets and rebates.
  • 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. The proposal would provide for apportionment of the interest income and capital gains tax annual exclusions would be required when a person ceases to be tax resident.
  • Retirement reforms would continue.  Read a February 2022 report [PDF 268 KB] prepared by the KPMG member firm in South Africa
  • Medical tax credits would be increased.
  • Certain income tax treaties currently provide tax relief from South African tax in relation to South African retirement savings vehicles for residents of other countries. These treaties would be revisited.
  • Provisional taxpayers with business interests are currently required to declare their assets (based on acquisition values) and liabilities in their tax returns each year. It is proposed that all provisional taxpayers with assets above R50 million be required to declare specific assets and liabilities at market values in their 2023 tax returns.

No wealth tax was announced; however there were indications that Treasury is collecting data to assess the viability of the introduction of a wealth tax.

Other provisions being reviewed by the government include:

  • The provisional tax systems, with a discussion paper to be published
  • The concept of “work from anywhere” and remote working, with discussion document to be published in 2022 

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 commission or bonuses. This section does not presently take into consideration the informal sector, for which “commission” is determined without reference to a percentage of earnings. Changes to section 7B are on the horizon to address these types of performance-based variable payments.
  • The employment tax incentive (ETI) would be expanded beginning 1 March 2022 to increase the maximum monthly value from R1000 per month to R1500 per month for the first 12-month period and from a maximum of R500 to R750 in the second 12 months of eligibility. 

Read a February 2022 report [PDF 220 KB] prepared by the KPMG member firm in South Africa

 

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