September 13, 2023

7 Tax Changes South Africans Need To Know About

South African Tax Changes 2023

Just as the South African Rand changes its design occasionally, so do tax laws get revised and revamped. The time of the year has fallen upon us for the National Treasury to publish the annual draft of tax law amendments, and this year, it is bringing non-compliant taxpayers into the mix.

We will see these changes and proposals for the new year in the annual budget. From a practical perspective, this will affect how the South African Revenue Services (SARS) will keep non-taxpayers liable. 

As the proposed laws do not affect regular income tax, citizens under debt review will not feel these changes too harshly.  

7 Tax Law Changes on the Cards

1. Pay-As-You-Earn

South African employers are now required to register for Pay-As-You-Earn (PAYE) for both South African and foreign employees. This streamlines income tax and the PAYE system across all companies and employers.

2. Interest-Free Loans

Any interest wavered from a low-interest or interest-free loan, including any credit owed by a trust, is considered a donation. This is now subject to a donation tax. This will decrease the trend of increasing small loans as it is no longer in the trust or company’s interest to offer interest-free loans. 

Read: Good debt explained

Loans for people under debt review, usually at a lower stake – organised through the debt review company – or are interest-free, may now impact their leniency towards repayments or arranged payments.

3. Trusts and Income Tax

Income distributed from South African trusts to foreign beneficiaries is now liable to income tax of 45% in the trust’s hands. In comparison, residents pay tax at their marginal rate of 18% to 45%, depending on their income bracket. 

National debt counsellors would advise people under the debt review process to tread carefully as their income is now taxed more than the average South African Joe.

4. FBE Exemption

The Foreign Business Establishment (FBE) exemption applies when Controlled Foreign Countries (CFCs) adhere to certain rules. The National Treasury is not proposing to clarify such rules, which results in all CFC compensated functions being performed by the CFC or another in the same group of companies. This will include South Africans with shares in a controlled foreign company, greatly impacting their investment payouts. 

5. Tax Auto-Assessment Extensions

SARS Commissioners will now allow extensions of the 40-day period to allow taxpayers who did not agree with the auto-assessment outcome to request a revised tax return. The Commissioner can extend this until mid-October.

Read: Budget tips for surviving South Africa’s rising living costs

6. Beneficial Owners

The words “beneficial owner” are now included in the Tax Administration Act, including the term’s meaning concerning the company. The purpose of this is to identify owners of registered entities and reduce money laundering and terrorism financing. 

7. Inter-Organisational Sharing

The inter-organisational sharing of information not only includes the Reserve Bank, FSCA, and FIC but will now also include other organisations like CIPC, the Directorate of Non-Profit Organisations and the Master of the High Court. 

What Do These Tax Law Changes Mean for You?

These changes will introduce a stricter verification process to ensure compliance in all tax-related business and income areas. The National Treasury emphasises the importance of these new changes and explains that it will promote transparency and accountability of funds.

Although the new tax laws may not impact the average taxpayer, ex-pats or residents relying on foreign funds are greatly affected. This has targeted a big group of South Africans since 2020 when COVID changed how residents earn money and make a living, from working for international companies to immigrating but saving in South Africa.

Reach Out To Debtline

While these changes may enable South Africa to run on a more transparent and streamlined system, the recent increases along with more income tax rules may leave some South Africans running to alternative entities for financial assistance, not only to pay their bills but also to pay the debt that pays their bills. 

Debtline can assist South Africans in this regard to stop creditors from hassling you, avoid being blacklisted and negotiate debt on your behalf thanks to the Debt Review process. Change may be scary, but don’t run away from your debt or the thought of increasing taxes.

Let Debtline offer you expert counselling to face your debt head-on and work towards being debt-free.