Tax targeting rich

2016-02-24 17:12 - Jaco Leuvennink
(iStock) ~ iStock

Cape Town - Although Finance Minister Pravin Gordhan surprised many by not raising the top tax bracket of 41%, the rich were targeted by increasing capital gains tax, as well as transfer duty on property sales above R10m.

Government proposes to increase the inclusion rate for capital gains for individuals from 33.3% to 40%, and for companies from 66.6% to 80%. This will raise the maximum effective capital gains tax rate for individuals from 13.7% to 16.4%, and for companies from 18.6% to 22.4%.

The annual amount above which capital gains become taxable for individuals will increase from R30 000 to R40 000. The effective rate applicable to trusts will increase from 27.3% to 32.8%. These new rates will become effective for assessment years beginning on or after March 1 2016.

The transfer duty rate on property sales above R10m will rise from 11% to 13%. This new rate will become effective for property acquired on or after March 1 2016.

Rakesh Seethal, Head of Employment Taxes and Tax Risk, Barclays Africa Tax said the focus today’s Budget was on tax relief to lower and middle income earners, and while higher income earners will experience less tax savings, they also have some relief on marginal taxes to look forward to.

“Whilst a 7% increase in the Capital Gains Tax inclusion rate was announced, it translates to a less than 3% increase in actual personal income tax.”

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