National Treasury has revised the proposed tax on sugary beverages, taking into account the 140 comments it received during public hearings in Parliament in February.

Briefing Parliament’s two finance committees on the 2017 Budget proposals and draft tax rates, National Treasury said the proposed rate on sugary beverages was lowered slightly from 2.29 cents per gram to 2.1c/g and the threshold will be adjusted so that the first four teaspoons of sugar is exempt. 

“That means a sugary tax will be levied from the fifth teaspoon for a 330ml can of soft drink. More precisely, 4g/100ml is not taxed,” National Treasury said. 

A tax rate of 1.05c/g of sugar in excess of 4g/100m will be levied for concentrated beverages. 

For the time being, 100% fruit juices and milk products with no added sugar will be exempted, although 100% fruit juices may be included in future. 

National Treasury is of the view that the revised sugary tax rate will have a milder impact on job losses, initially estimated to be about 5 000. 

The draft proposals will be published under a new schedule, entitled Health Promotion Levy, and will be part of the Draft Rates Bill, which contains the proposed tax rates and monetary thresholds announced in Finance Minister Pravin Gordhan’s 2017 Budget Review. 

The sugary tax proposals will be open for comments until March 31 2017. 

Dividend withholding tax changes 

Changes to dividend withholding tax, which increased from 15% to 20%, were implemented on February 22 – earlier than other tax proposals. 

The reason for this, National Treasury said, is to avoid potential avoidance as mainly small and medium-sized enterprises have considerable influence over their dividends policy. 

National Treasury pointed out that listed companies are liable for dividend withholding tax on the date of payment – even if declared before February 22. “Any payment on February 22 or later would be liable for a higher rate.” 

Outbound and inbound dividends 

Dividends paid from South Africa to foreign investors will also be subject to a dividend withholding tax rate of 20%. 

However, this is unlikely to affect many foreign investors, as their dividends tax rate may be reduced through the application of tax treaties, which in most cases lowers the rate to 5% or 10%.

As for inbound foreign dividends South African residents receive from foreign companies, National Treasury proposed that a maximum effective rate of 20% be levied.