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As South Africans we are so used to attaching a negative connotation whenever the word ‘tax’ is mentioned. However, the 2021 budget speech proposals provided the prospect of some welcomed tax relief. A 1% corporate tax rate reduction has since been approved in the latest budget speech. This reduction of corporate tax rate will only come into effect in 2023 and will start having an impact from thereon forward.

Along with the positive news for corporates, came a shock proposal regarding the limitation of assessed losses. When the corporate tax rate is reduced to 27% (from 28%), companies will be limited to utilise their assessed loss to the greater of R1 million or 80% of their taxable income. In short, many taxpayers would thus be liable to income tax on a minimum of twenty percent of the company’s current year taxable income, even if there is an assessed loss carried forward. From a fiscal perspective, the two proposals counterbalance one another to some degree.

In line with the budget proposals mentioned above, it is now more than ever, imperative that your corporate tax structure is setup in the most tax efficient manner. This is to ensure that you make the most of the budget proposal and not fall prey to possible pitfalls that may occur.

At SGN Konsult we offer strategic solutions to best manage these sorts of situations, do not hesitate to contact us for advisory on the best way forward for your company.

The SGN Konsult Team.


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