The National Assembly passed three taxation bills at its plenary sitting on Tuesday (26 November), with the pieces of legislation now set to go to the National Council of Provinces for concurrence.
The new legislation was part of finance minister’s Tito Mboweni’s budget announcements on 20 February with a number of public hearings on the bills held over the course of September.
They are the:
- Rates and Monetary Amounts and Amendment of Revenue Laws Bill
- Taxation Laws Amendment Bill
- Tax Administration Laws Amendment Bill
A brief outline of some of the notable changes in the bills are below.
The Rates and Monetary Amounts and Amendment of Revenue Laws Bill
- This bill deals with changes in rates and monetary thresholds, changes to personal income tax tables, increases of excise duties on alcohol and tobacco and adjustments to the eligible income bands that qualify for the employment tax incentive.
- In its report on the bill, the Standing Committee on Finance agreed with National Treasury and the South African Revenue Services (SARS) that the increase in illicit products was because of weak law enforcement and tax administration challenges at SARS. The Committee undertook to focus more on monitoring law enforcement measures on illicit tobacco trade and on SARS’ capacity and called on government to speed up its work of taxing other tobacco products, such as, electronic cigarettes and tobacco heating products;
- On personal income tax, the bill proposals are aimed at raising an extra R12.8 billion – by increasing the primary rebate, which affected tax-free rebates. Most relief from the 1.1% increase in primary rebates will go to lower-income groups. There is also no increase in medical tax credits – to assist funding of National Health Insurance and to provide extra tax revenue.
The Taxation Laws Amendment Bill
This bill’s proposals affect individual savings and employment tax, business tax, Value Added Tax and the Customs and Excise Act.
- A key proposal is an amendment to the tax treatment of surviving spouses’ pension. The amendment seeks to lessen the financial burden when calculating taxes, which retirement funds may withhold on spousal pensions. The amendment becomes effective on 1 March 2021. The original effective date, 1 March 2020, has been postponed for administrative reasons, to enable SARS and taxpayers to ready their systems for the changes.
- The bill also proposes a review of the allowable deduction for investors in the Venture Capital Companies (VCC) tax incentive scheme. The bill distinguishes between deduction amounts of natural persons (including trusts) – set at R2.5 million a year – and corporate investors – set at R5 million a year. Changes made to the VCC scheme in 2015 – to broaden it and increase uptake – resulted in high-net-worth individuals and companies disproportionately investing in VCCs to reduce their taxable income.
- The bill also refines the Employment Incentive Scheme, to align it with the National Minimum Wage Act of 2018. The scheme, introduced in January 2014, aims to reduce the cost of hiring young people (18 to 29 years old) without work experience through a cost-sharing mechanism with government.
The Tax Administration Laws Amendment Bill
The third bill makes technical corrections to:
- The Income Tax Act;
- The Customs and Excise Act;
- The Value Added Tax Act;
- The Skills Development Levies Act.
These amendments primarily align time periods for refunds, dates, and amounts to the Tax Administration Act and the Tax Administration Act.