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Important tax proposals to note: 1. Employment Tax Incentive: Government proposes to maintain the current value of the employment tax incentive. However, effective from 1 April 2025, the formula to calculate the incentive and the eligible income bands will be adjusted, in part due to adjustments of minimum wages since the last increase in the value of the incentive in 2022. 2. Cross-border tax treatment of retirement funds: The current treatment of cross-border retirement funds may have resulted in double non-taxation, particularly where South Africa is granted the taxing right by treaty. It is proposed that changes be made to the rules that currently exempt lump sums, pensions and annuities received by South African residents from foreign retirement funds for previous employment outside South Africa, with amendments in the current legislative cycle. 3. Government aims to expand South Africas tax treaty network and renegotiate some existing treaties to strengthen economic Read More …

Tax Proposals Corporate Income Tax Rate:Remains the same at 27%. Personal Income Tax:Personal income tax brackets remain unchanged. The primary, secondary and tertiary rebates also remain unchanged. National Treasury anticipates that additional revenue will be raised by not adjusting these brackets for inflation. It is interesting to note that the initial Budget Documents that related to the original February Budget did propose increases to these thresholds. VAT:Increases by 0.5 percentage points with effect from1 May 2025and a second 0.5 percentage point increase will take effect from1 April 2026. Therefore, the VAT rate increases from 15% to 15.5% on1 May 2025and to 16% on1 April 2026. The basket of items that are zero-rated for VAT will be expanded to include specific edible offal, specific meat cuts, unflavoured dairy liquid blends and specific canned vegetables to assist poor households. Capital Gains Tax:No changes are proposed in respect of Capital Gains Tax. Medical Read More …

Customs and Excise Act Reviewing the process on packages imported through eCommerce The approach to packages imported through eCommerce will be reviewed to ensure that the appropriate balance between simplicity and compliance with customs and excise requirements is being maintained.   Timeframe for delivery of export bills of entry Certain exporters face legitimate challenges in complying with the timeframe for submitting export bills of entry. It is proposed that the Customs and Excise Act be amended to enable the SARS Commissioner to provide, by rule, for a process by which exporters can be allowed to submit export bills of entry at a different time than what is currently provided for in the act.   Simplifying the process of substituting bills of entry in certain circumstances It is proposed that the Customs and Excise Act be amended to simplify the process of substituting a bill of entry in certain circumstances where Read More …

Contributed tax capital (CTC) is a tax concept that in essence is the consideration that is received by or that accrues to the company from the issue of its shares. It is defined in relation to each class of a companys shares. In the case of a non-resident company that becomes a South African resident company (due to the companys place of effective management changing to South Africa), CTC is defined as the market value of all the shares in the particular class immediately before the date on which the company becomes a South African resident. The definition of CTC underwent recent amendments to counter perceived avoidance and the 2023 Budget Review proposes further amendments.

This year’s National Budget, delivered on Wednesday, was dominated by South Africa’s power woes, with Finance Minister Enoch Godongwana announcing that government will take over a large part of Eskom’s debt. In addition, major tax incentives were announced to encourage more South Africans to embrace renewables and get off the grid. The Budget confirmed that South Africa has stepped further away from a fiscal cliff that loomed in 2020, with its ballooning state debt starting to stabilise, and tax revenue larger than previously expected. But Godongwana warned of major risks ahead. State of government finances Thanks to stronger-than-expected tax revenues, South Africa enjoyed a main budget primary surplus meaning that government spending (excluding debt interest payments) is less than the revenue it received – for the first time since 2008/09. Government’s tax income was almost R94 billion more than it expected a year ago. This will help the government’s budget Read More …

In this budget speech, a lot of questions linger, South Africans are seeking clarification on a variety of important subjects, including inflation which is evidently rising along with the rest of the world. Although inflation may have slowed down in part, it is still driving up wage demands. Will the government provide financing for Eskom and free the parastatal from its chronic predicament? Will Finance Minister Enoch Godongwana address the economic risks posed by state-owned enterprises such as Denel, Sanral, and Transnet?

Tackling base erosion and profit shifting remains a priority for the National Treasury and the South African Revenue Service (“SARS”). It was recently reported that in the 2021 fiscal year, SARS dealt with 345 cases of transfer pricing, base erosion and profit shifting to the value of almost ZAR12-billion. Yet, only three South African courts have dealt with transfer pricing. In none of these cases, however, was it necessary for witnesses to testify about the impugned transaction. It follows that this limited transfer pricing jurisprudence does not deal with the evidentiary aspects that may necessarily arise in such a dispute. A case in point is the evidentiary value of comparable transactions. A comparability analysis typically involves a comparison between the taxpayer’s transaction with third-party transactions which are comparable. Taxpayers usually rely on such a comparison to show that they transacted at arm’s length. But in transfer pricing matters, SARS often Read More …

Alleged base erosion and profit shifting activities of multinational enterprises (“MNEs”) have been a hot issue globally and therefore the chances of an MNE being confronted with a transfer pricing audit have increased substantially over the last few years. Owing to the intense focus on transfer pricing by almost all tax authorities around the world, together with a growing focus on international exchange of information, it seems only a matter of time before any MNE will be subject to transfer pricing audit scrutiny. Steps taken in preparation of a South African transfer pricing audit Taxpayers need to proactively adopt strategies that will enable them to manage the risks associated with the transfer pricing audit. Performing a self-assessment: A regular assessment of your inter-company transactions, the assessment of functions, assets and risks as well as the pricing structure is key. Check that your policy is up to date, ensure validity and Read More …

In the Tax Court judgment of Taxpayer A v Commissioner for the South African Revenue Service IT 25042, the taxpayer wanted a deduction for finance charges under section 24J of the Income Tax Act, 1962 in its income tax return for the 2016 year of assessment. The finance charges were comprised of raising fees, debt origination fees and structuring fees (collectively the “upfront fees”) which emanated from the taxpayer entering into loan agreements for the purposes of their property development and investment business. The court found that the upfront fees constituted “related finance charges” and therefore “interest” as defined in section 24J as it read at the time. It follows that the taxpayer was entitled to a deduction for the upfront fees in terms of section 24J. The definition of “interest” in section 24J had been amended with effect from 19 January 2017 to allow for a deduction of the Read More …

On 6 October 2022, as part of the ongoing work of the OECD/G20 Inclusive Framework (“IF”) on Base Erosion and Profit Shifting (“BEPS”) to implement the Two-Pillar solution to address the tax challenges arising from the digitalisation of the economy, the OECD released its progress report for comment. Background The report was prepared for the purposes of obtaining further input from stakeholders on the administration and tax certainty aspects of Amount A. Comments are requested with respect to the processes and rules contained in this document. Comments are required by no later than Friday, 11 November 2022. Significant progress has been made in developing the comprehensive technical rules for the new taxing right (Amount A) for market jurisdictions established under Pillar One. It is recognised that the substance of these rules must be stabilised before the development and completion of a Multilateral Convention (“MLC”) which will be signed and ratified Read More …