Capital Gains Tax to increase, but thresholds raised

Capital Gains Tax (CGT) for individuals and special trusts will be increased from 1 March- from 25% to 33.3%, while that for companies and other trusts from 50% to 66.6%.

This was announced by the Minister of Finance Pravin Gordhan in his Budget Speech today.

To mitigate the impact on middle-income earners, the various exclusion thresholds will be increased, he said.

The annual exclusion threshold would be raised from R20 000 to R30 000, the exclusion amount on death from R200 000 to R300 000, the primary residence exclusion from R1.5 million to R2 million, the exclusion amount for the disposal of a small business when a person is over the age of 55 – from R900 000 to R1.8 million and the maximum market value of assets allowed for a small business disposal for business owners over 55 – from R5 million to R10 million.

In a media briefing held shortly before he delivered his Budget Speech, Gordhan said South Africa was way below international norms on CGT, but was quick to point out that another increase was not on the cards, at least in this administration.

Gordhan also announced that the Square Kilometre Array (SKA) project – an international collaboration to build the world’s largest radio telescope – would qualify for VAT relief.

The secondary tax on companies comes to an end on 31 March, and a withholding tax on dividends, introduced at 15%, will be implemented from April 1.

Pension funds will benefit as they will receive dividends tax free, said Gordhan.

Among the tax proposals that would affect businesses, Gordhan said tax relief for companies that set up in special economic zones is being considered – including a reduction in the corporate income tax rate and support for employment and training expenses.

South Africa has a financial transaction tax on securities transfers, at a rate of 0.25%.

Gordhan has proposed abolishing the current exemption for brokers and taxing transactions for the broker’s benefit at a lower rate.

“The inclusion of financial derivatives in the base of the securities transfer tax is also under consideration,” he said.

As part of several measures outlined in the Budget Review to improve the corporate tax environment, Gordhan has mooted tax relief for housing developers who provide housing below R300 000 a unit.

Meanwhile, a revised policy paper on carbon tax would be published this year for a second round of public comment and consultation. – BuaNews