22 February 2023
Summary
The 2023 budget speech has come around again. Our finance minister, Mr Enoch Godongwana, set out several exciting developments. We set out some key highlights that would be of interest to clients of Vialto Partners.
Rooftop solar tax incentive
For individuals who are contemplating installing solar panels to combat load shedding, government is proposing a rooftop solar incentive for individuals to invest in solar PV.
Individuals will be able to receive a tax rebate to the value of 25% of the cost of any new and unused solar PV panels. To qualify, the solar panels must be purchased and installed at a private residence, and a certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024. The rebate is only available for solar PV panels, and not inverters or batteries, to focus on the promotion of additional generation. It can be used to offset the individual’s personal income tax liability for the 2023/24 tax year up to a maximum of R15 000 per individual. For example, an individual who purchases 10 solar panels at a cost of R40 000 can reduce their personal income tax liability for the 2023/24 tax year by R10 000. It is not clear at this stage whether this incentive is only for the 2023/24 tax year, or whether we will see it being extended, so best to start making plans for your home.
Increasing brackets by inflation and adjustment of transfer duty and retirement tax tables
To the relief of individual taxpayers, there have been no major adjustments to the marginal income tax rates and rebates, which have been adjusted for inflation of 4.9%. Details of the new rates can be found in our Vialto Partners tax card.
The brackets for transfer duties, retirement fund lump sum benefits and retirement fund lump sum withdrawal benefits will all be adjusted upwards by 10% to compensate for inflation. Tax rates remain unchanged. The rates are effective from 1 March 2023.
Two-pot retirement system
Following extensive public consultation, the first phase of changes to the retirement system is due to take effect on 1 March 2024. The intention is to enable pre-retirement access to a portion of one’s retirement assets, while preserving the remainder for retirement. Permissible withdrawals from funds accrued before 1 March 2024 will be taxed according to the lump sum tables. Withdrawals from the “savings pot” before retirement will be taxed at marginal rates. On retirement, any remaining amounts in the savings pot will be taxed according to the retirement lump sum table (for example, R550 000 is a tax-free lump sum on retirement).
Third-party data and personal income tax administration reform
A project has commenced to provide employer and employee data to the South African Revenue Service (SARS) on a monthly basis in a fully automated fashion. Over time, the need for employer PAYE annual reconciliation is expected to fall away, and the reform will be extended to third party data providers.
Remote working
As part of exploring the effect of remote work on the personal income tax regime, National Treasury and SARS committed to a multiyear review of allowances. We expect discussion document later in the year to outline workplace practices and policies, changes in the current environment and how different workplaces are affected by home office and travel allowance policies.
Apportioning the tax-free investment contribution limitation and limiting the retirement funds contributions deduction when an individual ceases to be a tax resident
In 2022, our legislation was amended to provide that, when an individual ceases to be a South African tax resident, the annual interest exemption applicable to individuals is apportioned and the capital gains tax annual exclusion applicable to individuals is limited. It is proposed to apportion the tax-free investment contribution limitation and retirement contribution deduction to apportion the annual limit on the deduction of the retirement funds contributions.
Clarifying the amount of employer contribution to a retirement fund to be deductible
This amendment proposes to clarify wording that the cash equivalent of the taxable benefit for employer retirement fund contributions be included in an employee’s income before a tax deduction is allowed.
Transfers between retirement funds by members who are 55 years or older
Though there have been various amendments to allow for transfers between retirement funds on a tax neutral basis, there are some instances where active contributing pension and provident fund members who have reached retirement age and been subjected to involuntary transfers to another pension or provident fund may still be subject to tax. To address this, it is proposed that members of pension or provident funds who have reached the normal retirement age as stipulated in the rules of that fund but have not yet opted to retire must, as part of the involuntary transfer, be able to have their retirement interest transferred from a less restrictive to a more restrictive retirement fund without incurring a tax liability.
Aligning tax registration requirements for non-resident employers
It has been noted that non-resident employers may not have representative employers in South Africa for purposes of employees’ tax. They are, as a result, not liable to deduct or withhold tax from the remuneration that is paid to their employees who render services in South Africa. Nevertheless, they are liable for skills development levies and unemployment insurance contributions, which many pay. It is proposed that the various provisions be aligned to ensure consistency.
Varying employees’ tax withholding in respect of remuneration
The Fourth Schedule to the Income Tax Act allows employers to request a variation in employees’ tax withholding to take into account foreign taxes paid, but this does not extend to equity instruments. It is proposed that SARS be empowered to vary the basis for withholding under these circumstances.
Extending the time period to submit a return where taxpayers disagree with an auto-assessment
SARS may make an assessment based on an estimate where a taxpayer does not submit a return. The taxpayer may, within 40 days from the date of the assessment, request SARS to make a reduced or additional assessment by submitting a true and full return. It is proposed that SARS be empowered to extend the period within which the taxpayer is required to submit their request to SARS by public notice. This will allow the deadline for the request to be aligned with the end of the filing season for non-provisional taxpayers.
Please reach out to Gavin Duffy, Kesiree Mari, Claire Abraham or your usual Vialto Partners South Africa contacts to discuss further.
Gavin Duffy – Partner- Vialto South Africa – gavin.duffy@vialto.com
Kesiree Mari – Director – Vialto South Africa – krishnavenee.mari@vialto.com
Claire Abraham – Senior Manager – Vialto South Africa – claire.abraham@vialto.com
Further information on Vialto Partners can be found here: www.vialto.com