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Key outcomes of the 2011 Budget

Customs

SARS has launched its Customs Modernisation Programme. Customs codes aligned with procedures prescribed in the Kyoto Convention have been introduced, and during 2011 automated inspection services and electronic acquittals will be implemented. Later this year, two bills will be introduced to Parliament to provide an internationally aligned legal framework that will support customs modernisation.

Voluntary disclosure programme

To encourage taxpayers to come forward to regularise their tax affairs without the imposition of additional tax, penalties and/or interest, the voluntary disclosure programme that began in November 2010 will remain open until 31 October 2011. More than 1 200 applicants have already come forward under the programme.

Gambling

Government proposes that with effect from 1 April 2012, all gambling winnings above R25 000, including those from the National Lottery, be subject to a final 15% withholding tax. Similar gambling taxes exist in India, the Netherlands and the United States.

Savings

Interest income is not taxed up to a certain threshold. As from 1 March 2011, government will increase the tax-free interest income annual threshold from R22 300 to R22 800 for individuals below 65 years, and from R32 000 to R33 000 for individuals 65 years and over. The foreign interest income threshold will remain at R3 700.

Several countries use tax incentives to encourage people to save towards specific goals such as education, healthcare, housing or retirement, or to promote general savings. Government will explore two incentivised savings schemes - one for housing (deposit for first-time homeowners) and another for higher education - as alternatives to tax-free interest income thresholds.

The possibility of a more consistent tax treatment of all forms of income from capital, such as interest, dividends and capital gains, will also be considered.

Fuel taxes

Government proposes to increase the general fuel levy by 10c/l on both petrol and diesel, effective from 6 April 2011.

Electricity levy

Government proposes to increase the levy applied to electricity generated from non-renewable and nuclear energy sources by 0.5c/kWh to 2.5c/kWh from 1 April 2011. Some of this revenue will be set aside to fund the rehabilitation of roads damaged as a result of the haulage of coal for electricity generation. The increase should have no impact on electricity tariffs, as it has already been taken into account in the National Energy Regulator tariff structure.

Industrial development zones

To support the objectives of the industrial policy action plan and the New Growth Path, businesses making Greenfield and/or Brownfield investments qualify for tax relief. Greenfield investments in industrial development zones (IDZs) qualify for additional relief. Government will consider expanding incentives for labour-intensive projects in IDZs.

Transfer duty

Government proposes to increase the transfer duty exemption threshold from R500 000 to R600 000. A rate of 3% will be applicable to the value from R600 001 to R1 000 000; an amount of R12 000 plus 5% to the value between R1.0 and R1.5 million; and an amount of R37 000 plus 8% to amounts above R1.5 million.

This revised rate structure will apply to properties acquired under purchase agreements concluded on or after 23 February 2011. It will also be applicable to legal persons (close corporations, companies and trusts).

Dividends tax

The dividends tax will come into effect on 1 April 2012, replacing the secondary tax on companies. The introduction of the tax should correct the impression that a tax on dividends is another tax on businesses. Legally and economically, it will be a tax on individuals and non-resident shareholders.

Research and development tax incentive

The research and development tax incentive is intended to encourage innovation and job creation. Government proposes to streamline the current incentive, introducing an approval process by the Department of Science and Technology before a taxpayer can claim this incentive. This should limit opportunities for retrospective reclassification of spending.

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Tax News Flash - Budget 2011 (PDF)

 

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