2021 Budget Overview

A concise overview of the 2021 Budget speech, including an Essential Tax Guide

Mar 3, 2021

6 minutes

Salome Young
Janine Langenhoven
A concise overview of the 2021 Budget speech, including an Essential Tax Guide

Finance Minister Tito Mboweni delivered his 2021 budget on Wednesday, 24 February. The 2021 budget acknowledges the severe impact that the COVID-19 pandemic has had on tax revenue collection and the fact that it has led to many business closures and job losses. Government has therefore indicated that it will not introduce further measures to increase tax revenue in the 2021 budget or over the next three years, to the extent originally envisioned.

Below we highlight some of the key changes and future tax proposals contained in this year’s budget which may impact your clients.

We also include our “2021 Essential Tax Guide” which we hope will be a helpful tool when advising clients.

Key tax proposals

  • Personal income tax brackets and the tax rebates will be adjusted by 5% (which is above inflation). This will bring tax relief of about R2.2bn and is similar to the tax relief provided in the 2020 budget.
  • On 7 April 2021 the fuel levy will be increased in line with inflation, by 26c/l, consisting of the general fuel levy (increased by 15c/l) and RAF levy (increased by 11c/l).
  • Levies on alcohol & tobacco will be increased by 8%. National Treasury have indicated that they will soon publish a discussion paper on the taxation of electronic nicotine and non-nicotine delivery systems.
  • The plastic bag levy will remain at 25c per bag however, bio-based plastic bags will be subject to a reduced levy of 12.5c per bag.
  • With effect from 1 March 2021, members of retirement annuities with a fund value below R15 000 (previously R7 000) will be allowed to take full withdrawals of such paid up retirement annuities prior to reaching retirement age.

Future proposals being considered

  • To make South Africa a more attractive market for investment, the corporate tax rate (currently 28%) will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022. There may be further decreases over the medium term.
  • Treasury proposes to expand the annuity options available to retirement fund members on retirement. Our understanding is that whereas currently a member may only purchase one type of annuity on retirement (i.e. either an annuity paid by the retirement fund, a fund-owned annuity, or a member-owned annuity), in the future, the member may be allowed to purchase a combination of these.
  • Amendment to legislation is being considered in relation to the taxation of retirement fund benefits when a member ceases to be tax resident in South Africa. It appears as if SARS is concerned about non-tax residents’ retirement fund benefits not being subject to tax in South Africa where a Double Taxation Agreement applies and provides relief.
  • Treasury is considering amending legislation to clarify the date of disposal of assets acquired by beneficiaries and heirs from a deceased estate.
  • Concerns have been raised regarding loans transferred between trusts in an effort to circumvent the anti-avoidance rules currently contained in Section 7C of the Income Tax Act. Treasury will further review these anti-avoidance rules to prevent circumvention.
  • The Voluntary Disclosure Programme will be reviewed during the course of 2021 to ensure that it is aligned with SARS’ strategic and policy objectives.

Changes in respect of Emigration and Foreign Investment Allowance

  • As outlined in last year’s Budget Review Documentation, with effect from 1 March 2021, certain changes have been made to the foreign exchange control system. SARS has recently summarised some of these changes as follows:
  • The concept of “emigration” and SARB’s approval process have been replaced with the concept of “ceasing to be SA tax resident”.
  • Emigration applications stamped and signed by an Authorised Dealer on or before 28 February 2021 will still be finalised under the previous rules and the individual will be able to apply for Tax Compliance Status (“TCS”) in respect of “emigration”.
  • All applications submitted from 1 March 2021 will be processed by SARS based on the new concept of “ceasing to SA tax resident”. An MP336(b) form will no longer be required however, the individual must still apply via the SARS TCR01 Application.
  • The concept of “blocked rand accounts” has fallen away from 1 March 2021 and all foreign capital transfers will now be handled in line with the rules applicable to Foreign Investment Allowance transfers.

2021 Essential tax guide

Personal income tax

Individuals and special trusts
1 March 2021 - 28 February 2022

Taxable Income (R) Rate of Tax
0 – 216 200 18% of taxable income
216 201 – 337 800 38 916 + 26% of amount above 216 200
337 801 – 467 500 70 532 + 31% of amount above 337 800
467 501 – 613 600 110 739 + 36% of amount above 467 500
613 601 – 782 200 163 335 + 39% of amount above 613 600
782 201 – 1 656 600 229 089 + 41% of amount above 782 200
1 656 601 and above 587 593 + 45% of amount above 1 656 600
Rebates
Primary R15 714 (R14 958)
Secondary (65+) R8 613 (R8 199)
Tertiary (75+) R2  871 (R2 736)
Tax Thresholds
Below 65 R87 300 (R83 100)
65 to below 75 R135 150 (R128 650)
75 and over R151 100 (R143 850)
Trusts other than special trusts
Tax rate 45%
Taxation of retirement fund lump sums

Retirement Fund Withdrawal Benefit

Taxable Income (R) Rate of Tax
0 – 25 000 0% of taxable income
25 001 – 660 000 18% of taxable income above R25 000
660 001 – 990 000 R114 300 + 27% of taxable income above R660 000
990 001+ R203 400 + 36% of taxable income above R990 000

To calculate the tax i.r.o retirement or withdrawal lump sum:

Step 1: Add current lump sum to all previous lump sums* and apply current withdrawal tax tables.
Step 2: Add all previous lump sums* and apply current withdrawal tax tables.
Step 3: Answer in step 1 minus answer in step 2 = tax payable on current lump sum.

*Only retirement lump sums after 1 October 2007, withdrawals after 1 March 2009 and severance benefits after 1 March 2011 must be taken into account.

Retirement Lump Sum or Severance Benefit

Taxable Income (R) Rate of Tax
0 – 500 000 0% of taxable income
500 001 – 700 000 18% of taxable income above R500 000
700 001 – 1 050 000 R36 000 + 27% of taxable income above R700 000
1 050 001+ R130 500 + 36% of taxable income above R1 050 000

To calculate the tax i.r.o retirement lump sum:

Step 1: Add current lump sum to all previous lump sums* and apply current retirement tax tables.
Step 2: Add all previous lump sums* and apply current retirement tax tables.
Step 3: Answer in step 1 minus answer in step 2 = tax payable on current retirement lump sum.

*Only retirement lump sums after 1 October 2007, withdrawals after 1 March 2009 and severance benefits after 1 March 2011 must be taken into account.

Retirement funds contribution deduction
Maximum deduction is lesser of R350 000; or
27,5% of higher of remuneration or taxable income (incl taxable capital gain); or
taxable income excluding taxable capital gain
Tax on local dividends
Individuals 20% withholding tax
SA Companies Exempt
Capital gains tax
Individuals and special trusts Inclusion rate: 40%
Max effective rate: 18%
Annual exclusion: R40 000
Companies Inclusion rate: 80%
Effective rate: 22.4%
Trusts Inclusion rate: 80%
Effective rate: 36%
Interest exemptions
Individuals under 65 years R23 800
Individuals 65 and older R34 500
Estate duty
Estate up to R30 million 20%
Above R30 million 25%
Abatement R3.5million
Tax Free Savings Accounts
Annual contribution limit R36 000
Lifetime contribution limit R500 000
Donations tax
Donations up to R30 million 20%
Above R30 million 25%
Annual exemption for individuals R100 000
Sinking funds: Comparison of tax rates
  Individuals
Direct investments
Trusts
Direct investments
Individuals and Trusts
Sinking Funds (IPF)
Income Tax Max 45% 45% 30%
Effective CGT Max 18% 36% 12%

Authored by

Salome Young
Legal Counsel
Janine Langenhoven
Legal Counsel

Important information
All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an adviser or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. Ninety One Investment Platform (Pty) Ltd and Ninety One SA (Pty) Ltd are authorised financial services providers.