National Treasury indicated in the 2020 budget that government is reducing the number of tax incentives in the tax system, and the 2021 budget has reminded taxpayers that four further tax incentives are scheduled to lapse on reaching their respective sunset dates.
Treasury noted that: “Tax incentives often undermine the principles of a good tax system, which should be simple, efficient, equitable and easy to administer.”
The incentives in respect of airport and port assets, rolling stock, and low-cost residential units have a sunset clause of February 28, 2022.
The film incentive, which provides for the exemption from normal tax of income derived from the exploitation rights of approved films, expires on January 1, 2022.
Treasury has invited stakeholders to provide detailed reasons on why the sunset clauses should be extended. The submission deadline is March 31.
Incentives put on watch
Tax provisions for travel and working from home
Treasury will review current travel and home office allowances to investigate their “efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives”.
Treasury recognises that this could potentially have an impact on salary structuring, and will commence consultations during 2021/22.
Urban development zones and learnership tax incentives
Treasury is currently reviewing the urban development zones and learnership tax incentives. The incentives have been extended for two years while their reviews are completed.
Research and development tax incentive
The research and development (R&D) tax incentive introduced in 2006 is administered by the South African Revenue Service (Sars) and the Department of Science and Innovation (DSI), formerly called the Department of Science and Technology (DST). In 2015 the minister of the DST established a task team to assist in ironing out problems and making recommendations.
Bizarrely, the DST would not allow any patent attorney to sit on the task team.
In the opinion of a well-known patent attorney “the task team’s published report [April 2016] is riddled with misstatements of law, inaccuracies and an entirely superficial treatment of intellectual property and legal concepts”.
The R&D incentive expires on October 1, 2022, and Treasury and the DSI will be publishing a discussion paper inviting public comment on the future of the incentive.