The National Treasury published its full Budget Review for 2019 on Wednesday (20 February).
As part of the review, Treasury outlined a number of tax amendments which have been proposed for the upcoming legislative cycle.
These include changes to the foreign employment income tax exemption for South African residents – also known as the ‘expat tax’ – as well as a number of ad valorem and sin tax changes.
You can find these changes detailed below.
1. Expat tax
“From 1 March 2020, South African residents who spend more than 183 days in employment outside the country will be subject to South African taxation on any foreign employment income that exceeds R1 million,” Treasury said.
“To prevent monthly withholding of income tax both in South Africa and the host country, it is proposed that South African employers be allowed to reduce their monthly local pay-as-you-earn (PAYE) withholding by the amount of foreign taxes withheld on the employment income.
“Before implementation, a workshop will be held to consult taxpayers on their administrative concerns,” it said.
It added that any resulting amendments will be processed during the 2019 legislative cycle.
2. Carbon tax
The carbon tax will be implemented on 1 June 2019, and will add 9 cents per litre to petrol and 10 cents per litre to diesel prices.
According to the National Treasury, it will give effect to the ‘polluter-pays principle’, prices greenhouse gas emissions and aims to ensure that businesses and households take these costs into account in their production, consumption and investment decisions.
“The tax will assist in reducing emissions and ensuring South Africa meets its commitments under the 2015 Paris Climate Agreement,” it said.
It added that the tax will be reviewed after three years and that SARS and the Department of Environmental Affairs will jointly administer the tax.
3. Expanding Ad valorem taxes for computers and gaming consoles
Ad valorem taxes currently apply to televisions and monitors with screens larger than 45cm – irrespective of their end use.
Because of this, smart technology items are harder to distinguish and therefore difficult to categorise, Treasury said.
“To prevent these items from escaping ad valorem tax, it is proposed that the computer category be expanded to include any apparatus with a screen larger than 45cm”, it said.
It added that Ad valorem taxes on gaming consoles are currently limited to consoles that use a television screen. “However, games are now displayed on many different items, ” it said.
“It is proposed that the provisions be amended to include any external screen or surface on which gaming console images can be reproduced.”
4. Gambling tax
The 2012 Budget proposed a gambling tax in the form of a 1% levy to fund rehabilitation and awareness-raising programmes to mitigate the negative effects of excessive gambling.
Government intends to publish draft legislation for public comment during 2019, Treasury said.
5. Taxing electronic cigarettes
According to Treasury, the use of electronic cigarettes and tobacco heating products has increased in recent years.
“Government intends to start taxing these products,” it said.
“The National Treasury and the Department of Health will consult on the appropriate mechanisms, structure and timing of the tax.”
Tax Change: Ad valorem excise duty on motor vehicles
Because of the way ad valorem excise duty is currently calculated, vehicles produced locally are taxed at a higher rate than imported vehicles.
To remove this anomaly the government proposes to align the tax treatment, Treasury said.
This should, in theory, make locally produced cars cheaper to buy.
Toyota recently highlighted that taxes make up 42% of car prices in South Africa.