On Wednesday, 21 February 2018, all eyes were on the Minister of Finance in Parliament, where he delivered his budget speech. It became apparent over the last few months that bad news would be the order of the day as tax hikes were not only expected, but seemed unavoidable.
Therefore, it was no surprise that the Value Added Tax (VAT) rate was increased to 15%. To counter the effect that the hike would have on the poorest of the poor, the current zero-rating on basic food items (such as maize meal, brown bread and rice) were retained and the social grants were increased by a margin higher than inflation. The effective date for the increase in the VAT rate is 1 April 2018.
Other highlights include:
The general fuel levy will increase by 22 cents per litre while the Road Accident Fund levy will rise by 30 cents per litre (effective 4 April 2018).
Estate duty will increase from 20% to 25% for estates over R30 million (effective 1 March 2018).
Donations exceeding R30 million will be taxed at 25% (effective 1 March 2018).
Excise duties on tobacco products will increase by 8,5%, and those on alcohol between 6% and 10% (effective 1 March 2018).
Increase in the ad-valorem excise duty rate on luxury goods (for example, cars and smart phones) from 7% to 9% (effective 1 April 2018).
Increases in the plastic bag levy, the motor vehicle emissions tax and the levy on incandescent light bulbs to promote eco-friendly choices.
A slight change in the tax rates for individuals to accommodate fiscal drag, but only for the lower income tax brackets, resulting in the primary tax threshold increasing to R78 150 in 2018/19 (2017/18: R75 750).
Medical tax credits will increase from R303 to R310 per month for the first two beneficiaries and from R204 to R209 per month for the remaining beneficiaries.
The list is not comprehensive. You are welcome to download ASL’s electronic tax guide from our website CLICK HERE.
The increase in the VAT rate will pose challenges to some business owners as the timing of supply for certain transactions can be complex – should you have any questions, please contact us for assistance.