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  • Budget 2022 - Restructuring the Corporate Income Tax-System a Balancing Act
Articles:

Budget 2022 - Restructuring the Corporate Income Tax-System a Balancing Act

23 February 2022

In furthering its quest to restructure and create a balance in the corporate income tax system, Government is giving with the one hand but taking with the other.  Corporate South Africa certainly welcomes the corporate income tax rate reduction of 1 per cent to 27 per cent, but are giving up certain incentives. 

Several corporate tax incentives will not be renewed when they reach their sunset date. These include:

  • Section 12DA (rolling stock) on 28 February 2022
  • Section 12F (airport and port assets) on 28 February 2022
  • Section 12O (films), which lapsed on 31 December 2021
  • Section 13sept (sale of low‐cost residential units through an interest free loan) on 28 February 2022.

Although some taxpayers may feel aggrieved by the discontinuance of these specific allowances, we certainly applaud an across-the-board incentive, being the rate reduction, as opposed to focussed incentives benefitting a few.

Some incentives that have been found to be effective and which create the intended benefits will be retained, however.

The Research and Development (R&D) tax incentive will be extended in its current form until 31 December 2023. After the discussion document and an online survey reviewing the R&D tax incentive that were published for public comment on 15 December 2021, a workshop will be held with interested parties during 2022. It is proposed that the further extension of the incentive and potential amendments will be included in the 2022 Taxation Laws Amendment Bill.

It is also proposed that the value of the Employment Tax Incentive (ETI) will be increased with 50% from 1 March 2022. The ETI will increase from a maximum of R1 000 to a maximum of R1 500 per month in the first 12 months and from R500 to a maximum of R750 in the second 12 months of eligibility. Although this increase is welcomed, it is surprising in light of recent cases of abuse in the ETI system.  However, it is expected that SARS will keep a close eye on the ETI system and will come down hard on scheming taxpayers to curb the abuse.

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