Last month’s Budget 3.0 withdrew the contentious proposed VAT changes. This resulted in inflation-linked fuel levy increases of 16c for petrol and 15c for diesel, from 4 June. Other tax proposals from March’s Budget – including static personal tax thresholds, reduced transfer duties, and sin tax increases – remain unchanged. The tax measures contained in Budget 3.0 will raise an additional R18bn in 2025/26. A further R20bn in tax measures are postponed to Budget 2026 – unless SARS collects an extra R35bn in uncollected taxes, for which Budget 3.0 allocated an additional R4bn in funding. Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice. © AccountingDotNews

“… the economy needs to grow much faster and in an inclusive manner. This is the central objective of the current administration.” (Finance Minister Enoch Godongwana – Budget 2025) The tabling of Finance Minister Enoch Godongwana’s fourth Budget in February was marked by an unprecedented three-week postponement, following a deadlock around the original Budget proposal to increase VAT by 2%. A revised Budget, finally tabled on 12 March, proposed a 0.5% increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026 – but the proposal was still not enough to satisfy most other political parties. In his Budget Speech, the finance minister called the Budget proposals “a bold and pragmatic approach” to ensure the economy grows “much faster and in an inclusive manner”. He admitted that the economy has stagnated for over a decade, with GDP growth averaging less than 2%, while forecasts for medium-term GDP growth are a dismal 1.8%. While the powers that be attempt to reach consensus on the Budget 2025 proposals, businesses and individuals in South Africa will find little support from the fiscus to survive these low-growth economic conditions.  This is evident from our overview below of the most pertinent Budget 2025 proposals. In a nutshell, the finance minister is trying to cover another substantial Budget shortfall by directly and indirectly increasing the tax burden on corporate and individual taxpayers. Budget proposals that will impact you  The 0.5% VAT increases proposed for 2025 and 2026 will impact every South African, while disproportionately affecting lower-income households strained by high electricity costs, inflation and interest rates in a weak economy. To alleviate their impact on poor households, the list of zero-rated food items is extended to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals. Personal income tax brackets will not be adjusted for inflation for a second year running. This means that, like last year, individuals who receive a salary increase will again pay more tax, and could be pushed into a higher tax bracket. No inflation adjustments were proposed for tax rebates or medical tax credits – which once again translates into more tax payable by individuals. Above-inflation increases in the excise duties on alcohol (6.75%) and tobacco (4.75 – 6.75%) are no surprise. This means that with immediate effect, the duty on: a 340ml can of beer increases by 16c a 750ml bottle of unfortified wine goes up by 29c a 750ml bottle of fortified wine goes up by 48c a 750ml bottle of spirits will increase by R5.97 a 23g cigar goes up by R8.49 a pack of 20 cigarettes rises by R1.04 vaping products increase by 14c per millilitre. Changes to the rules regarding the tax treatment of cross-border retirement funds are proposed.  A one-year extension in the R370 social relief of distress (SRD) grant and above-inflation increases ranging from R30 to R130 per month in other social grants will provide minimal relief to the poorest South African households. SARS has…

“Our bigger challenge… is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas.” (Finance Minister Enoch Godongwana – Budget 2024) Finance Minister Enoch Godongwana’s third Budget Speech in an election year contained few surprises, but also little in the form of good news, especially for South Africa’s personal income tax payers. The Minister quoted dismal local average expected real GDP growth of 0.6% for 2023, which is projected to reach 1.6% between 2024 and 2026. This poor economic performance is ascribed to the persistent constraints in electricity supply and freight, rail and ports, as well as a high sovereign credit risk. And the result? A sharp drop in tax revenue collection for 2023/24 which, at R1.73 trillion, is R56.1 billion lower than estimated! To make up the shortfall, Budget 2024 contains tax measures that will raise an additional R15 billion in 2024/2025, mainly through income tax raised by not adjusting personal tax brackets, rebates and medical tax credits for inflation, as well as above-inflation increases in alcohol and tobacco excise duties. Other main proposals included no increase to the general fuel levy for 2024/25, a global tax on multinational companies in South Africa with an annual revenue exceeding €750 million and the R150 billion withdrawal from SA's Gold and Foreign Exchange Contingency Reserve Account. These announcements are briefly detailed below, along with some of the other announcements that will impact individuals and businesses. Budget proposals that will impact you Addressing the Budget shortfall, personal income tax brackets are not adjusted for inflation - so individuals who received a salary increase this year are likely to pay more tax as they could fall into a higher tax bracket. No inflation adjustments to the tax rebates. Medical tax credits per month are not increased by inflation. A one-year extension in the R350 Social Relief of Distress (SRD) grant and increases ranging from R20 to R100 per month in other social grants. Above-inflation increases in the excise duties on alcohol and increases of between 4.7 and 8.2% on tobacco products. This means that the duty on: a 340ml can of beer increases by 14c, a 750ml bottle of wine goes up by 28c, a 750ml bottle of fortified wine goes up by 47c, a 750ml bottle of spirits will increase by R5.53, a 23g cigar goes up by R9.51, a pack of 20 cigarettes, rises by 97c, vaping products increase to R3.04 per millilitre. Two-pot retirement reform to be implemented on 1 September 2024, allowing individuals access to a portion of their retirement savings before their retirement date. Budget proposals that will impact your business A global minimum corporate tax will be implemented from 1 January 2024, with multinational corporations with an annual revenue exceeding €750 million subject to an effective tax rate of at least 15%, regardless of where their profits are located. This will broaden the corporate tax base, enabling more tax revenue collection without increasing existing…

“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023) Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties. Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions. Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive. These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses. Budget announcements that will impact you personally A new tax incentive to install rooftop solar panels: For one year from 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of installing rooftop solar panels, up to a maximum of R15,000, to reduce their tax liability in the 2023/24 tax year. The personal income tax brackets will be fully adjusted for inflation, increasing the tax-free threshold from R91,250 to R95,750. Medical tax credits per month will be increased by inflation to R364 for the first two members, and to R246 for additional members. The retirement tax tables for lump sums withdrawn before retirement and at retirement, will be adjusted upwards by 10%, increasing the tax-free amount at retirement to R550,000. Revised draft legislation on the ‘two-pot’ retirement system will be published, including the amount immediately available at implementation from 1 March 2024. Withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal. Social grants will increase in line with CPI inflation. The R350 grant will continue until 31 March 2024. Increases in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on: a 340ml can of beer increases by 10c, a 750ml bottle of wine goes up by 18c, a 750ml bottle of spirits will increase by R3.90, a 23g cigar goes up by R5.47, a pack of 20 cigarettes, rises by 98c. Budget announcements that will impact your business Expanding the existing section 12B tax allowance for renewable energy, businesses will now be allowed to reduce their taxable income by 125% of the cost of an investment in renewables for two years from 1 March 2023. There will be no thresholds on the size of the projects that qualify. According to National Treasury, where a renewable energy investment of R1 million is made by a business, that business will qualify for a deduction of…