A super tax bracket of 45% has been introduced for individuals with a taxable income of more than R1 500 000.
Middle class individuals earning between R500 000 and R1.5 million should be most upset as Treasury did little to adjust the tax tables for inflation.
The effect is that they will pay R12 billion more than if the brackets had been adjusted to fully accommodate inflation.
Capital Gains Tax:
Capital gains inclusion rates remain at 40% for individuals and 80% for companies and trusts.
With the introduction of the super tax bracket of 45%, the maximum effective capital gains tax rates are now as follows:
- Individuals 18% (previously 16.4%)
- Companies 22.4% (remained the same)
- Trusts 36% (previously 32.4%)
The annual exclusion remains R40 000 and at death R300 000.
Dividend withholding tax:
Dividend Withholding Tax increases from 15% to 20%, thus a substantial increase of 33.34%. This increase is effective from 22 February 2017.
Small changes were made to the tax brackets of small businesses while the rates of other companies remained the same at 28%.
Trusts, excluding special trusts, will be taxed at a flat rate of 45%.
Treasury provided relief in the affordable housing market through an increase in the threshold above which transfer duty is paid from R750 000 to R900 000. This means that no transfer duty will be payable on a property to the value of R900 000 or less.
Although an increase in the estate duty rate of 20% to at least 25% was expected together with an increase in the basic deduction of R3 500 000, it remains unchanged. The spousal roll-over benefit is also still intact.
- Donations tax remains unchanged and is levied at a flat rate of 20% on the value of assets donated.
- The first R100 000 of assets donated in each year by a natural person is exempt from donations tax.
- In the case of a taxpayer that is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total.
- Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.
- The difference between the official interest rate (currently 8%) and the interest rate charged on loans made to trusts by connected persons will be subject to donations tax.
Offshore Tax Amnesty:
In order to allow taxpayers to regularise their undisclosed offshore assets and income affairs SARS introduced the special voluntary disclose programme (SVDP) which will be open until the end of August 2017.
According to SARS they have already received disclosures to the value of R3.8 billion in foreign assets and income under the program and anticipate to receive more in lieu of the automatic exchange of information between foreign tax authorities which will make is difficult for taxpayers to hide their foreign assets and income. The automatic exchange of information between foreign tax authorities is due to start on 1 September 2017.
With the changes to the CGT tax rate applicable to trusts and the implementation of section 7C on interest-free loan to trusts, clients will have to seek professional advice and not engage in rushed decisions especially when it comes to the future of the trust (to close it or not).
Please contact us () if you have any questions or if you need a complimentary consultation on trusts or tax matters.