ACCOUNTING □ TAXATION □ BUSINESS CONSULTING

ACCOUNTING □ TAXATION □ BUSINESS CONSULTING

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2008/9 Budget Tax Proposals

1. Main Tax Proposals

2. Headline Corporate Income Tax Rate

3. Support For Small And Medium Enterprises

4. Relief For Individuals

5. Savings

6. Electricity Levy

7. Value Added Tax (VAT)

8. Fuel Levies

1.  Main Tax Proposals

The following are the main tax proposals for the 2008/9 tax year:

• A reduction in the headline corporate tax by 1% from 29% to 28%.

• A simplified tax package for very small businesses with an annual turnover up to R1 million.

• An increase in the compulsory VAT registration threshold from an annual turnover of R 300 000 to R1 million.

• The introduction of an electricity levy of 2c / kWh.

2.  Headline Corporate Income Tax Rate

The headline corporate income tax rate is reduced from 29% to 28% for companies & close corporations.

To limit tax avoidance and/or arbitrage, given the gap between the corporate tax rate and top marginal personal income tax rate, it is proposed that closely held (passive) companies be subject to a 40% tax rate.

3.  Support For Small and Medium-Sized Businesses

Income tax tables for Small Business Corporations with financial years ending on any date between 1 April 2008 and 31 March 2009:

Income tax are levied at the following rates at the different taxable income brackets:

The following presumptive tax were proposed for very small businesses:

4.  Relief For Individuals

The primary rebate for individuals were increased to R 8 280 for the 2008/9 tax year, and the secondary rebate to R 5 040 for individuals over 65.

The Tax Thresholds for individuals are R 46 000 for persons younger that 65, and R 74 000 for persons older than 65.

5.  Savings

The first R 19 000 (R 27 500 for persons over 65) interest and dividend income is exempt from tax.  The threshold for foreign dividends and interest were increased to R 3 200 per year.

The annual exclusion threshold for Capital Gains Tax were increased to R 16 000.

The Tax Free Medical Aid Contributions were increased to R 570 for each of the first 2 beneficiaries, and R 345 for each additional beneficiary.

6.  Electricity levy

Government proposed to impose a 2c/kWh tax on electricity generated from non-renewable sources, to be collected at source by the producers/generators of electricity.  This measure will serve a dual purpose of helping to manage the current electricity supply shortages and protecting the environment.

7.  Value Added Tax

It is proposed that the threshold for compulsory VAT registration be increased from R 300 000 to R 1 million turnover.

8.  Fuel Levies

It is imposed that the general fuel levy on petrol and diesel be increased by 6 c/l to 127 c/l and 111 c/l respectively with effect from 2 April 2008. 

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