On Wednesday, February 21, Finance Minister Enoch Godongwana gave the 2024 National Budget Speech.
The country’s current economic situation, growth projections, the enormous expenditures associated with servicing debt, increased sin tax ideas, and the extension of the social relief grant were just a few of the numerous issues and subjects covered in the budget.
Based on growth estimates that hint at a decrease, analysts and academics feel that South Africa’s economy is approaching a tipping point.
However, the minister stated that ongoing rolling blackouts, ineffective ports and railroads, and substantial sovereign credit risk pose a threat to the country’s economic progress.
TAX BRACKETS
Year ending 29 February 2024
| TAXABLE INCOME | RATE OF TAX (R) |
| R1 – R237 100 | 18% of taxable income |
| R237 101 – R370 500 | R42 678 + 26% of taxable income above R237 100 |
| R370 501 – R512 800 | R77 362 + 31% of taxable income above R370 500 |
| R512 801 – R673 000 | R121 475 + 36% of taxable income above R512 800 |
| R673 001 – R857 900 | R179 147 + 39% of taxable income above R673 000 |
| R857 901 – R1 817 000 | R251 258 + 41% of taxable income above R857 900 |
| R1 817 001 and above | R644 489 + 45% of taxable income above R1 817 000 |
| REBATES | 2023/2024 | 2022/2023 |
| Primary | R17 235 | R16 425 |
| Secondary (Persons 65 and older) | R9 444 | R9 000 |
| Tertiary (Persons 75 and older) | R3 145 | R2 997 |
| AGE | TAX THRESHOLD | |
| Below age 65 | R95 750 | R91 250 |
| Age 65 to below 75 | R148 217 | R141 250 |
| Age 75 and over | R165 689 | R157 900 |
| MEDICAL TAX CREDIT RATES | 2023/2024 | 2022/2023 |
| PER MONTH (R) | ||
| For the taxpayer who paid the medical scheme contributions | R364 | R347 |
| For the first dependent | R364 | R347 |
| For each additional dependent(s) | R246 | R234 |
| INTEREST EXEMPTION | |
| SOUTH AFRICAN SOURCED INTEREST | |
| Persons under 65 years | R23 800 |
| Persons 65 years and older | R34 500 |
South African sourced interest income earned by non-residents is exempt if the non-resident was absent from the country for an aggregate of 183 days in the 12 months preceding the accrual of that interest.
FREE OF TAX INVESTMENTS
Individuals are not required to pay taxes on amounts accumulated or received in relation to specific approved investment products and policies. The annual maximum for contributions to these mandated investments and plans is R36 000. There is now a lifetime cap of R500 000.
DIVIDENDS
While dividends from South African corporations are normally tax-free for individuals receiving them, the companies that pay the dividends to the individuals withhold dividend tax at the rate of 20%.
Foreign dividends are subject to taxation at a maximum effective rate of 20% for persons who receive them from foreign corporations when they hold less than 10% of the shares. There are no deductions for costs incurred in order to generate overseas dividends.
FOREIGN INTEREST
In South Africa, foreign interest accruing to or received by a resident is liable to standard tax.
TRAVEL EXPENSES
The chart on the SARS website, www.sars.gov.za, can be used to calculate rates per km, which can then be used to establish the permitted deduction for business travel against an allowance or advance in cases where real costs are not submitted.
- The fixed cost is lowered proportionately if the travel allowance is used for a portion of the tax year.
- No tax is due on a travel allowance paid by an employer to an employee if it is based on the employee’s genuine business travel mileage, up to a maximum rate of R4,64 per kilometer, regardless of the vehicle’s worth or the distance traveled.
- This option is not accessible if the employer provides you with additional payment for the vehicle, such as an allowance or reimbursement (apart from parking or tolls).
- Maintaining a trip journal is required to deduct business travel costs.
- For the purpose of computing finance costs and wear and tear, the cost of the vehicle must be restricted to the maximum permitted value as per the SARS website, www.sars.gov.za, when reporting actual expenditure.
RETIREMENT FUND CONTRIBUTIONS
- A member of a pension, provident, or retirement annuity fund may deduct their contributions made during the tax year. There is a maximum deduction of the larger of:
- 27.5% of the worker’s pay for Pay As You Earn (PAYE) purposes (without lump sum payments from retirement funds or severance benefits); or 27.5% of the worker’s taxable income (without lump sum payments from retirement funds or severance benefits).
- The maximum deduction that can be made is R 350 000. Contributions that above the cap in a given tax year are carried over to the following tax year.
DONATIONS
- 10% of taxable income is the maximum deduction allowed for donations to specific public benefit organisations (severance benefits and lump amounts from retirement funds excluded). In the subsequent tax year, gifts to eligible public benefit organisations that total more than 10% of taxable income are recognised as such.
- A flat rate of 20% is applied to gifts totalling less than R30 million, and a rate of 25% is applied to donations totalling more than R30 million. This came into force in March 2018. Donations received before this date are not eligible to be counted towards the cumulative total.
- Individuals are excluded from donations tax on their first R100,000 of gifts made each year, as well as donations made to their spouses and specific public benefit organisations.
- The donation tax does not apply to non-residential donations.
BENEFITS OF LUMP SUM
Other than death/retirement lump sum benefits, lump sum benefits resulting from the withdrawal of membership in a retirement fund, including monies designated as part of divorce settlements in specific circumstances, are taxed as shown in the following table:
| TAXABLE INCOME FROM | TAX PAYABLE |
| R1 – R550 000 | 0% of taxable income |
| R550 001 – R770 000 | 18% of taxable income above R550 000 |
| R770 001 – R1 155 000 | R39 600 + 27% of taxable income above R770 000 |
| R1 155 001 and above | R143 550 + 36% of taxable income above R1 155 000 |
* Taxable income is cumulative and includes all lump sum payments whether on retirement (after 1 October 2007) or withdrawal (after 1 March 2009), or a severance benefit (after 1 March 2011).
CAPITAL GAINS TAX (CGT)
| MAXIMUM EFFECTIVE RATE OF TAX | |
| Individuals and special trusts | 18% |
| Companies | 21.6% |
| Other trusts | 36% |
| INCLUSION RATES | |
| Individuals, special trusts and individual policyholder funds | 40% |
| Companies and trusts | 80% |
| EXCLUSIONS | |
| Individuals, special trusts and individual policyholder funds | R40 000 |
| Individuals in year of death | R300 000 |
| Primary residence exclusion on the disposal of a primary residence | R2 million gain/loss |
| Small business assets (persons over age 55 and market value of assets not more than R10 million) | R1.8 million |
INCOME TAX ON CORPORATIONS
As it was last year, the corporate income tax rate is at 27%.
Similar to other nations, South Africa will impose a set rate of 15% on multinational corporations starting on January 1, 2024, regardless of their place of business. The bill is available for review and comments.
RIGHTS INHERITED
Additionally, the royalty scales have not changed.
TRUSTS
No changes have been announced to the taxation of trusts, but changes to the taxation of interest-free loans to trusts can be expected to provide more clarity.
VAT RATE
The VAT rate remains at 15%.
EXCISE DUTIES AND CHARGES
Excise duty on alcoholic beverages increases by between 6.7% and 7.2%, and on tobacco products by between 4.7% and 8.2%.
FOREIGN EXCHANGE RESERVE
To reduce the debt the government must incur, R150 billion is withdrawn from the gold and foreign exchange reserve account, which is used to protect the currency.
- Click for a Budget Speech summary as reported by BusinessTech
- Click to read the complete Budget Speech
