What you need to know about the budget speach

Industrial development zones

To support the objectives of the industrial policy action plan and the New Growth Path, businesses making Greenfield and/or Brownfield investments qualify for tax relief. Greenfield investments in industrial development zones (IDZs) qualify for additional relief. Government will consider expanding incentives for labour-intensive projects in IDZs.

Transfer duty

Government proposes to increase the transfer duty exemption threshold from R500 000 to R600 000. A rate of 3% will be applicable to the value from R600 001 to R1 000 000; an amount of R12 000 plus 5% to the value between R1.0 and R1.5 million; and an amount of R37 000 plus 8% to amounts above R1.5 million.

This revised rate structure will apply to properties acquired under purchase agreements concluded on or after 23 February 2011. It will also be applicable to legal persons (close corporations, companies and trusts).

Dividends tax

The dividends tax will come into effect on 1 April 2012, replacing the secondary tax on companies. The introduction of the tax should correct the impression that a tax on dividends is another tax on businesses. Legally and economically, it will be a tax on individuals and non-resident shareholders.

Research and development tax incentive

The research and development tax incentive is intended to encourage innovation and job creation. Government proposes to streamline the current incentive, introducing an approval process by the Department of Science and Technology before a taxpayer can claim this incentive. This should limit opportunities for retrospective reclassification of spending.

National Health Insurance

Government expects that the National Health Insurance (NHI) will be phased in over 14 years. While initial allocations have been made in the 2011 Budget, the NHI system will require funding over and above the current revenues allocated to public health.

Preliminary analysis indicates that the phasing in of a payroll tax (payable by employers), an increase in the VAT rate and a surcharge on individuals' taxable income could be considered as funding options. The feasibility and practicality of co-payments or user charges will also be explored. Announcements about specific funding instruments will be made in the 2012 Budget.

Islamic finance

Last year's Budget announced that the taxation of Islamic financial products would be aligned with conventional financial instruments. Provisions were

introduced to cover several instruments. This year the rules will includeijara products, which act like commercial finance leases. Amendments to

legislation will facilitate the issue of Islamic-compliant government bonds.

Electricity levy

Government proposes to increase the levy applied to electricity generated from non-renewable and nuclear energy sources by 0.5c/kWh to 2.5c/kWh from 1 April 2011. Some of this revenue will be set aside to fund the rehabilitation of roads damaged as a result of the haulage of coal for electricity generation. The increase should have no impact on electricity tariffs, as it has already been taken into account in the National Energy Regulator tariff structure.

Fuel taxes

Government proposes to increase the general fuel levy by 10c/l on both petrol and diesel, effective from 6 April 2011