The South African government recently announced a number of key tax changes for the 2023 tax year. These changes are designed to simplify the tax system, encourage investment and economic growth, and make it easier for businesses to comply with their tax obligations.
The Budget Speech for the fiscal year 2023 was delivered by a lively Finance Minister, Enoch Godongwana, with the theme of “repair and maintenance”. A plan to reduce the fiscal deficit, whilst maintaining expenditure on social and infrastructure development was presented. This would be achieved without increasing taxes, as the fiscus was boasted by strong increases in revenue collection.
The Minister was proud to announce tax relief measures for individual taxpayers, in addition to zero tax increases. Following past trends, the customary inflationary adjustment to personal income tax tables and medical tax credits was declared. Treasury has also increased the threshold for retirement lump sum benefits and lump sum withdrawals tax tables as well as transfer duty tables by 10%. Another boon for corporate taxpayers carried over from last year was the reduced corporate income tax rate, down to 27% from 1 April 2023
Some of the key changes include:
- Increase in the personal income tax threshold: The personal income tax threshold has been increased from R19,143 to R20,800 per month. This means that more people will pay no income tax.
- Reduction in the corporate tax rate: The corporate tax rate has been reduced from 28% to 27%. This will make it more affordable for businesses to operate in South Africa.
- Introduction of a new tax incentive for businesses that invest in renewable energy: The South African government has introduced a new tax incentive for businesses that invest in renewable energy. This incentive will allow businesses to deduct 125% of the cost of qualifying investments in renewable energy from their taxable income.
- Increase in the excise duty on alcohol and tobacco: The excise duty on alcohol and tobacco has been increased. This means that the prices of these products will increase.
These changes will have a significant impact on businesses of all sizes. Businesses need to be aware of these changes and how they will affect their tax liability.
How the latest tax changes will affect your business in 2023
The following are some of the ways in which the latest tax changes in South Africa will affect your business in 2023:
- Personal income tax threshold: The increase in the personal income tax threshold means that more people will pay no income tax. This could lead to an increase in the number of customers for your business.
- Corporate tax rate: The reduction in the corporate tax rate will make it more affordable for businesses to operate in South Africa. This could lead to increased investment and economic growth.
- Renewable energy tax incentive: The new tax incentive for businesses that invest in renewable energy could make it more attractive for businesses to switch to renewable energy sources. This could help to reduce your business’s carbon footprint and save you money on your energy bills.
- Excise duty on alcohol and tobacco: The increase in the excise duty on alcohol and tobacco could lead to higher prices for these products. This could affect your business if you sell these products.
What you need to do to comply with the latest tax changes in 2023
To comply with the latest tax changes in 2023, businesses need to:
- Review their tax returns and make any necessary adjustments.
- Update their accounting software to reflect the new tax rates and thresholds.
- Advise their employees of the changes to the personal income tax threshold.
- Consider investing in renewable energy to take advantage of the new tax incentive.
- Factor in the increased excise duty on alcohol and tobacco when pricing their products.
Conclusion
The latest tax changes in South Africa are significant and will have a major impact on businesses of all sizes. Businesses need to be aware of these changes and take steps to comply with them. By doing so, they can ensure that they are paying the correct amount of tax and minimising their tax liability.
If you have any questions about the latest tax changes in South Africa, please contact your accountant or tax advisor for more information.
