Global Daily Tax News, South Africa Outlines Important Changes This Personal Tax Season, (Jun 21, 2024)

On June 19, 2024, the South African Revenue Service (SARS) released an overview of pertinent changes to personal income tax rules and to the ITR12 form this tax season.

Several changes have been made to form ITR12. Sections 10(1)(o)(i) and 10(1)(o)(ii), concerning the Foreign Employment Income Exemption, have been redesigned to simplify the filing process.

SARS has highlighted that taxpayer information must be included in the contact information section of the ITR12 form, and not that of a tax agent. SARS said, "there is already a designated container for Tax Practitioners to declare their own particulars. Therefore, Tax Practitioners must not use fields intended for individuals to declare their own details."

SARS has released a summary of the following tax system changes:

Pro-rata deduction in respect of contributions to retirement funds

"Section 11F(2)(a) of the Income Tax Act No 58 of 1962 was amended as follows: Where any person's year of assessment is less than 12 months, the amount stipulated in section 11F(2)(a) of the Act used to calculate the allowable retirement contribution deduction (currently ZAR350,000 (USD19,404)) shall be adjusted. The adjusted amount will bear the same ratio to ZAR350 as the number of days in that year of assessment bears to 365 days.

Therefore, if any person's year of assessment is less than 12 months, the allowable retirement contribution deduction (currently ZAR350,000) will be applied pro rata."

Exemption of amounts received or accrued in respect of tax-free investments

"Section 12T(4)(a) of the Income Tax Act was amended as follows: Where any person's year of assessment is less than 12 months, the contribution limitation stipulated in section 12T(4)(a) of the Act (currently ZAR36,000), shall be adjusted. The adjusted contribution limitation will apply in aggregate for any year or years of assessment during the 12-month period commencing in March and ending at the end of February of the immediately following calendar year.

Therefore, if any person's year of assessment is less than 12 months, the applicable contribution limitation (currently ZAR36,000) will be applied pro rata."

Deductions in respect of erection or improvement of buildings in Urban Development Zones

"Section 13quat of the Income Tax Act, was amended by substituting the following paragraph in subsection (5) for paragraph (c): '(c) which is brought into use by the taxpayer after March 31, 2025.' Therefore, the Income Tax Return (ITR12) form will be amended to extend the allowable deduction until 31 March 2025."

Solar energy tax credit

"To encourage individuals to invest in clean electricity-generation capacity, the solar energy tax credit was available for one year. It applied to new and unused solar PV panels that were acquired by the individual and brought into use for the first time from March 1, 2023, to February 29, 2024.

The amount of the solar energy tax credit allowed as a deduction to an individual was 25 percent of the cost of the solar PV panels described above, up to a maximum of ZAR15,000.

It should be noted that a deceased estate did not qualify for solar tax credit."

Redesigned deduction in respect of certain machinery, plant, implements, utensils, and articles used in production of renewable energy

"The redesigned Renewable energy tax incentive will apply to the currently eligible renewable energy sources, with no electricity-generation limits for the duration of this temporary incentive. Assets will qualify if they are used in the generation of electricity. Businesses can deduct 125 percent of the cost incurred with reference to eligible assets, upfront.

Where a taxpayer disposes of an asset on or before March 1, 2026, for which a redesigned renewable energy tax incentive is granted, the amounts deducted (a maximum of 125 percent of the cost of the asset) will be fully recouped," the summary concludes.