The end of a cycle and the beginning of a new one: Publication of the 2022 tax law amendment acts and Annexure C workshops for the 2023 Budget

It happens every year, and 2023 would be no different; on 5 January 2023, the key pieces of tax amendment legislation for the 2022 legislation cycle were promulgated in the Government Gazette, which included the Tax Administration Laws Amendment Act, 16 of 2022 (TALAA), Taxation Laws Amendment Act, 20 of 2022 (TLAA), and Rates and Monetary Amounts and Amendment of Revenue Laws Act, 19 of 2022 (Rates Act).

12 Jan 2023 3 min read Tax & Exchange Control Alert Article

At a glance

  • The key tax amendment legislation for the 2022 cycle in South Africa was promulgated on 5 January 2023, including the Tax Administration Laws Amendment Act, Taxation Laws Amendment Act, and Rates and Monetary Amounts and Amendment of Revenue Laws Act.
  • The amendments in these acts will have different effective dates, with some applying retrospectively and others starting from 1 March 2023, the beginning of the next tax year.
  • The 2023 tax legislation cycle has already begun, with public submissions and workshops held in November and December 2022. The 2023 Budget, expected in the second half of February 2023, will reveal whether proposed public amendments have been accepted.

The promulgation of these amendment acts brings to an end the 2022 legislation cycle, including the public consultation process that followed the publication of the draft tax amendment bills in July 2022. Whereas the TALAA deals with provisions regarding tax administration across various pieces of tax legislation, including the Tax Administration Act, 28 of 2011, the TLAA contains amendments to substantive provisions of South Africa’s tax legislation, including income tax, corporate tax, international tax and carbon tax. The Rates Act includes amendments to tax rates, rebates and excise duties prescribed in tax legislation, most of which were announced in the 2022 Budget.

The amendments in each of these pieces of legislation will not all come into effect at the same time - some of the amendments will apply retrospectively while others will only come into effect at the beginning of the next tax year, that is 1 March 2023. The date on which a specific amendment provision comes into effect is in many instances indicated in the provision itself. Where the date of commencement is not indicated, that amendment will be deemed to come into effect when the relevant amendment was promulgated, being 5 January 2023.

2023 tax legislation cycle and Annexure C workshops

Although the 2022 cycle only came to an end recently, the 2023 cycle already started in November 2022 when National Treasury (NT) invited the public to submit technical tax proposals for possible inclusion in Annexure C of the 2023 Budget. Following the submission of proposals, NT hosted workshops on 8 and 9 December 2022, during which the public was given an opportunity to present and engage NT on their proposals.

A considerable number of submissions were made by the public; one of the most interesting and topical issues discussed during the workshops related to the proposed withdrawal of Practice Note 31 (PN 31), which the South African Revenue Service (SARS) has proposed withdrawing from 1 March 2023. When SARS indicated its intention to withdraw PN 31, which has been in place for almost 30 years, it suggested that legislative amendments would likely be made that would apply instead of PN 31 and that the intention to withdraw was done to give the public an opportunity to propose amendments for inclusion in Annexure C. PN 31 states that even if a person earning interest on capital or surplus funds does not carry on the trade of a moneylender, it is SARS’ practice to allow expenditure incurred in the production of interest to the extent that it does not exceed the interest income earned. A significant number of taxpayers rely on this provision to claim an interest deduction, and many will be waiting with bated breath to see what is announced in the 2023 Budget. Although the decision to withdraw PN 31 will ultimately be SARS’ decision and not NT’s, the 2023 Budget will hopefully give some indication whether the intended withdrawal will take place and if so, what provisions will be proposed to address the void.

Given the current energy challenges South Africa faces, another interesting proposal made related to expanding the deductions for investments made into renewable energy, including the deduction in section 12B of the Income Tax Act, 58 of 1962.

2023 Budget

The 2023 Budget will likely be published in the second half of February 2023, on the same day that the Budget Speech is also given by the Minister of Finance. It will then be revealed whether proposals made by the public during the Annexure C process were accepted.

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