South Africa’s 2018-19 budget, announced today, proposes the nation’s first VAT rate increase since 1993, raising the VAT from 14 to 15 percent to cover a revenue shortfall.
No changes are made to the countries’ 28 percent corporate tax rate in an effort to maintain South Africa’s competitiveness in the light of falling corporate rates around the world, the budget documents say.
Updated draft regulations on foreign electronic services and supporting amendments to the VAT legislation were also published today. The update would widen the scope of foreign electronic services subject to South African VAT to include all services as defined in the VAT Act that are provided by means of an electronic agent, electronic communication, or the internet for any consideration. The updated proposal also makes changes to persons required to register, exclusions, and compliance.
The government said it will review South Africa’s controlled foreign company regime to see if a reduction in tax is warranted in the light of the global trend toward lower corporate tax rates.
Further, the government will soon issue a discussion draft on the tax treatment of excessive debt in an effort to ensure a sustainable corporate base. It will also attempt to refine rules for debt-financed acquisitions of controlling interest in an operating company.
The budget today also approved six special economic zones that would grant companies a reduced corporate tax rate and employment tax incentives.
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