23 Februrary 2011
Finance Minister Pravin Gordhan has announced various tax incentives for businesses, particularly small and micro enterprises, as well as plans to overhaul two failed tax incentives in a bid to make them more attractive to businesses.
Presenting his Budget speech in Parliament in Cape Town on Wednesday, Gordhan also introduced various tax proposals for businesses which will help boost job creation. These include changes to the turnover tax for micro enterprises.
The turnover tax for micro enterprises with an annual turnover of up to R1-million will be adjusted so that tax will be payable only if turnover exceeds R150 000 a year. This will take effect from March 1. The rate structure will also be reviewed by the National Treasury.
Micro enterprises that register for Value-added Tax (VAT) will no longer be barred from registering for turnover tax. This takes effect from 1 March 2012.
Scrapping secondary tax on companies
A dividends tax will take effect on 1 April 2012, replacing the secondary tax on companies.
The National Treasury believes that doing away with secondary tax on companies will correct the impression that a tax on dividends is another tax on businesses, as the new tax will be a tax on individuals and non-resident shareholders, rather than on the business itself.
The learnership tax incentive, designed to support youth employment, will expire in September 2011, but Gordhan said the government proposed to extend this for a further five years, subject to an analysis of its effectiveness with all stakeholders.
The government also proposes to streamline the current research and development tax incentive by introducing an approval process by the Department of Science and Technology before a taxpayer can claim the incentive, with the aim of limiting opportunities for retrospective reclassification of spending.
Venture capital tax overhaul
Another incentive to be overhauled would be the venture capital tax incentive, which was introduced into the Income Tax Act in 2009, but had seen a “poor response” from those looking to set up venture capital companies.
“The approach will be refined so as to facilitate greater access to equity finance by small and medium businesses and junior mining companies,” Gordhan said.
He said consideration would also be given to expanding such incentives for labour-intensive projects in Industrial Development Zones (IDZs).