South Africa's Budget 2024 - Introduction
On 21 February 2024, South Africa's Finance Minister Enoch Godongwana presented a budget speech introducing key tax proposals poised to shape the nation's fiscal landscape.
These proposals, which will undergo public commentary later this year, signal a robust approach to modernising tax regulations and incentivizing economic growth.
But what are the key points?
Tax Natives will go all Top of the Pops and give you a run-down of the top 10 tax takeaways from the budget speech!
Number 1: Electric Vehicle Production
From 1 March 2026, a new investment allowance of 150% for investments in electric and hydrogen-powered vehicle production will come into effect.
It is holed that this marks a step towards sustainable industrial future.
Number 2: Infrastructure Development
As part of the Budget speech, it was announced that the government will explore a flow-through tax regime for specific infrastructure projects.
This is aimed at bolstering investment in crucial sectors.
Number 3: Renewable Energy Boost
We are also told that there will be adjustments to the renewable energy allowance under section 12B, which will be effective from 1 March 2025.
In addition, there will be an increase in the carbon offset allowance threshold from 1 January 2024.
Together, these reflect a focus on securing a future from greener energy sources.
Number 4: Interest Limitation Revisions
The rules limiting interest deductions in respect of reorganisations and acquisition are to be aligned with the rules that limit interest deductions incurred on debt between connected parties,
where the interest earned is not taxed.
Number 5: Partnership Definitions and Assessed Losses
The status of a “connected person” in relation to a "qualifying investor" is to be reviewed, in
order to limit its application in respect of limited partners in an en commandite partnership.
In addition, it is proposed that the assessed loss restriction rule be removed for companies that are in the process of liquidation, deregistration or a winding up.
Number 6: Degrouping Charges and Third-party Shares
Another announcement was the intention to narrow the scope of the degrouping charge in relation to intragroup transactions.
This is avoid the de-grouping being engaged when there is a change in shareholding affecting a group of companies, whilst the companies involved in the original intragroup transactions are still part of another group.
Number 7: Ownership Requirements and Tax Capital
Extensions to ownership requirement exclusions and adjustments to "contributed tax capital" anti-avoidance measures cater to the dynamics of corporate financing.
Number 8: Foreign Capital Gains and Exchange Items
Proposals to amend foreign tax credits and expand the definition of exchange items address the intricacies of international capital movements and financial reporting.
Number 9: VAT on Non-resident Services
There will be amendments to the VAT Act and Electronic Services Regulations.
These will seek to align South Africa's digital economy taxation with global practices, including adjustments for input tax claims and services supplied to non-resident subsidiaries.
Number 10: Carbon Tax and Non-resident Vendors
There will be an update to the Carbon Tax Act alongside new requirements for non-resident vendors supplying electronic services emphasise environmental concerns and the digital economy's tax landscape.
Conclusion - South Africa's Budget 2024
These proposals reflect a strategic pivot towards incentivising green technology, streamlining tax regulations, and enhancing South Africa's global tax compliance posture.
With public commentary anticipated, stakeholders have a pivotal role in shaping the final legislative outcomes.
The draft Global Minimum Tax Bill, also released alongside the budget, signifies further alignment with international tax standards, marking a new chapter in South Africa's fiscal policy.
Final thoughts - South Africa's Budget 2024
If you have any queries about South Africa's Budget 2024, or South African tax matters in general, then please get in touch.