South Africa budget in 2017: Bold taxation perspectives towards the business

Are there any important changes that affect businesses in South Africa with the introduction of the 2017 budget?

One focus of the new legislation is its taxation policies. The corporate taxation rate remains high at almost 30%. In addition, there is an increase of dividend tax upon distribution, which will definitely affect larger corporations. This steep increase of 5% (before was 15% and now is up to 20%) will result in a very high effective tax rate of more than 40%.

Fortunately, double taxation treaties can limit the exposure of this dividend tax upon distribution, but not all companies will be able to enjoy such privilege. New legislation towards double taxation treaties is expected to take place in this year’s legal cycle, limiting the so-called shopping of double tax treaties and certain permanent structures.

Another focus of the South African legislation is targeted at the digital business. Vast numbers of policymakers and entrepreneurs are expected to visit Johannesburg for Global Entrepreneurship Congress (GEC). The main agenda for the congress will be searching for new ways in doing digital business and identifying opportunities for control and cooperation with public entities.

Part of the planned budget will be focused on special digital economic zones and industrial parks in South Africa, which are set to benefit from more than 4 billion rands allocated by the Government under optimal taxation rules, aiming to attract foreign investments.