Completing

the economic
jigsaw
Tax Budget Guide 2025/2026
2 | Completing the economic jigsaw

Income tax: Individuals

and special trusts
Tax rates (year of assessment ending 28 February 2026)

Taxable income Rates of tax

R0 – R237 100 18% of each R1 of taxable income

R237 101 – R370 500 R42 678 + 26% of the amount above R237 100

R370 501 – R512 800 R77 362 + 31% of the amount above R370 500

R512 801 – R673 000 R121 475 + 36% of the amount above R512 800

R673 001 – R857 900 R179 147 + 39% of the amount above R673 000

R857 901 – R1 817 000 R251 258 + 41% of the amount above R857 900

R1 817 001 and above R644 489 + 45% of the amount above R1 817 000

Tax thresholds
Individuals who must submit
Age Threshold
tax returns
Below age 65 R95 750 The Commissioner gives annual public
Age 65 to below 75 R148 217 notice of the persons who are required to
submit tax returns for normal tax
Age 75 and older R165 689 purposes.
The relevant Government Gazette is
Trusts, other than special trusts, will be taxed at a expected to be issued in June/July 2025
flat rate of 45%. in relation to the tax year ended 28
February 2025.
Tax relevant Government Gazette Public
Tax rebates (natural persons) notices can be found here: Public
Notices | South African Revenue Service
• Primary rebate – R17 235
(sars.gov.za).
• Secondary rebate (age 65 to below 75) – R9 444
• Tertiary rebate (age 75 and older) – R3 145
 Completing the economic jigsaw | 3

Capital gains tax – Individuals

Capital Gains Tax Exemptions / exclusions • A capital gain in relation to

(CGT): Individuals from CGT the disposal of a primary
• The annual exclusion for residence, if the proceeds
Relevant rates from the disposal of that
individuals and special
trusts is R40 000. primary residence does not
Inclusion rate: 40% exceed R2 million, must be
• The exclusion granted to disregarded.
individuals during the year
of death is R300 000. • The exclusion on the
Statutory rate: 0% – 45% disposal of a small business
• The first R2 million of the for persons 55 years and
capital gain or capital loss older is R1.8 million,
in respect of the disposal of
Effective rate: 0% – 18% provided that the market
a primary residence must value of the business does
be disregarded. not exceed R10 million.
4 | Completing the economic jigsaw

Allowances
Subsistence Travel allowance Alternative simplified method:
allowances and No tax is payable on a
advances reimbursement paid by an
employer to an employee
Where the recipient is obliged which does not exceed the
to spend at least one night SARS rate per kilometre,
away from his/her usual place regardless of the value of
of residence on business, and the vehicle.
the accommodation to which
that allowance or advance The SARS rate per kilometre
relates is in South Africa, and for the 2026 tax year will be
the allowance or advance is available on the SARS website
granted to pay for: under Legal Counsel /
Secondary Legislation /
• meals and incidental Income Tax Notices.
costs, an amount of R570
per day is deemed to have This alternative simplified
been expended. method is not available if other
compensation in the form of an
• incidental costs only, an allowance or reimbursement
amount of R176 for each A log book confirming
business kilometres travelled (other than for parking or toll
day which falls within the fees) is received from the
period is deemed to have and total kilometres travelled
during the tax year must be employer in respect of
been expended. the vehicle.
maintained in order to claim a
These rates also apply where deduction against the travel
an employee is obliged to be allowance.
away from the office on a Travel table
day trip. PAYE must be withheld by
the employer on 80% of the The actual distance travelled
allowance granted to the during the tax year and the
employee. distance travelled for business
purposes, substantiated by a
The withholding percentage
logbook, are used to determine
Overseas costs: The may be reduced to 20% if the
the cost which may be claimed
applicable rate per country employer is satisfied that at
against a travelling allowance.
is available on the SARS least 80% of the use of the
website at Subsistence motor vehicle for the tax year Rates per kilometre which may
Allowances and Advances will be for business purposes. be used in determining the
| South African Revenue allowable deduction for
No fuel and/or maintenance
Service (sars.gov.za) or business travel against an
costs may be claimed if the
Legal Counsel / allowance or advance where
employee has not borne the
Secondary Legislation / actual costs are not claimed,
full cost thereof (e.g. if the
Income Tax Notices on the are determined by using the
vehicle is covered by a
SARS website. table on SARS’s website.
maintenance plan).
The fixed cost must be
reduced on a pro-rata basis if
the vehicle is used for
business purposes for less
than a full year.
 Completing the economic jigsaw | 5

Fringe benefits
vehicles Employer-provided
The taxable value is 3,5% of residential
the determined value (the cash accommodation
cost including VAT) per month In the case of employer-
of each vehicle. provided residential
However, where the vehicle is: accommodation, where the
employer-provided
• the subject of a accommodation is leased by
maintenance plan when the the employer from an
employer acquired the unconnected third party, the
vehicle, the taxable value value of the fringe benefit to be
is 3,25% of the determined included in gross income is the
value; or lower of:
• acquired by the employer • the cost to the employer of
under an operating lease, providing the
the taxable value is the cost accommodation; and
incurred by the employer
under the operating lease • the amount calculated with
plus the cost of fuel. reference to the formula.
80% of the fringe benefit must “Remuneration proxy” is the
be included in the employee’s remuneration derived by the
remuneration for the purposes employee in the previous year
of calculating PAYE. of assessment and is used in
the formula mentioned above It
The percentage is reduced to has been proposed that the
20% if the employer is satisfied term “remuneration proxy” be
that at least 80% of the use of amended to include exempt
the motor vehicle for the tax foreign remuneration.
year will be for business
purposes. The formula will apply if the
accommodation is owned by
On assessment, the fringe the employee, but it does not
benefit for the tax year is apply to holiday
reduced by the ratio of the accommodation hired by the
distance travelled for business employer from non-associated
purposes substantiated by a institutions.
logbook, divided by the actual
distance travelled during
the tax year.
Interest-free or
On assessment, further relief low-interest loans
is available for the cost
of licence, insurance, The fringe benefit to be
maintenance and fuel for included in gross income is the
private travel, if the full cost difference between interest
thereof has been borne by the charged at the official rate for
employee, and if the distance the benefit and the actual
travelled for private purposes is amount of interest charged.
substantiated by a logbook.
Employer-provided
6 | Completing the economic jigsaw

Exemptions
Interest and dividend No deductions are allowed for Fringe benefit
income expenditure to produce exemption for employer
foreign dividends.
Under 65 years of age – provided bursaries
The first R23 800 of interest Employer-provided bursaries to
income is exempt. Foreign remuneration employees are not subject to
65 years of age and over – exemption income eligibility thresholds or
The first R34 500 of interest monetary limit criteria.
Where an employee works
income is exempt. However, there are other
abroad for more than a certain
Interest is exempt if earned by a amount of qualifying days (see criteria, such as repayment
non-resident person who is an below), that foreign conditions, that must be met for
individual and who is physically remuneration is exempt from the bursary to be exempt
absent from South Africa for at tax in South Africa. The entirely.
least 183 days during the 12 exemption is limited to the first The remuneration eligibility
month period before the interest R1.25 million of threshold applicable to
accrues, or if the debt from foreign remuneration. employees in respect of
which the interest arises is not bursaries granted to their
For the foreign remuneration
effectively connected to a relatives, is R600 000.
exemption to be applied, an
permanent establishment of
employee must be rendering The monetary limits for
that non-resident person in
services outside of South Africa bursaries to relatives are as
South Africa.
for more than 183 days in a 12- follows:
Interest exemptions are subject month period and for more than
to apportionment in a tax year 60 consecutive days in the • R20 000 for grade R to
in which an individual ceases to same 12-month period. grade 12 or for qualifications
be a South African tax resident. up to and including NQF
In an effort to reduce the cash level 4; and
South African dividends are flow burden on the employee,
generally exempt after the the South African employer may • R60 000 for qualifications
withholding of dividends tax apply to SARS for a tax from NQF level 5 and above.
(except to the extent that anti- directive allowing Foreign Tax The monetary limits for relatives
avoidance provisions have Credits (FTCs) as a tax with disabilities are as follows:
been triggered). reduction in the South African
payroll. • R30 000 for grade R to
grade 12 or for qualifications
Employees who are not up to and including
Foreign interest and remunerated via a South NQF level 4; and
dividends African payroll will be
considered provisional • R90 000 for qualifications
There is no exemption in from NQF level 5 and above.
respect of foreign sourced taxpayers and will be required
interest income. to claim the FTCs when filing No exemption applies if the
their provisional and annual tax bursary is subject to an element
Where an individual holds less returns. of salary sacrifice.
than 10% of the equity share
capital of a foreign company
which distributes a dividend, the
dividend will be taxed at a
maximum effective rate of 20%,
as determined by a formula.
 Completing the economic jigsaw | 7

Deductions from income –

Individuals
Contributions to Retirement reform Home office deduction
pension, provident and Effective 1 September 2024 (in Employees who work from
retirement annuity terms of the two-pot system home more than 50% of the
funds regime), persons who time, and have set aside a
contribute to South African room to be occupied for the
Employer contributions to retirement funds will have purpose of “trade”, may be
South African retirement funds limited pre-retirement access allowed to deduct certain
for the benefit of employees to some of their retirement expenses incurred in
are deemed to be taxable savings. Marginal tax rates will maintaining a home office. The
fringe benefits in the hands of apply to the savings accessed deduction will be calculated on
employees. Depending on the pre-retirement. a pro-rata basis, provided that
nature of the fund, the fringe the requirements as set out in
benefit is either the actual cash section 11(a) of the Income
value of the contribution or Tax Act, read in conjunction
determined by a formula. The Donations to certain
with sections
employee will be deemed to PBOs 23(b) and 23(m), are met.
have made contributions to the
Deductions in respect of
value of the fringe benefit
donations to certain Public
(which, together with their own
Benefit Organisations (PBOs)
contributions, may be eligible
are limited to 10% of taxable
for a deduction).
income (excluding retirement
The annual tax deduction for fund lump sums and severance
contributions to all retirement benefits).
funds is limited to the lower of
The amount of donations
R350 000, or 27,5% of the
exceeding 10% of the taxable
greater of taxable income
income is treated as a donation
before the inclusion of a
to qualifying PBOs in the
taxable capital gain (excluding
following tax year. Third-party
retirement and severance lump
reporting has been extended to
sums) or remuneration
tax deductible donations made,
(excluding retirement and
so that SARS can pre-populate
severance lump sums).
these on the relevant tax
Any contributions in excess of returns.
the limitations will be rolled
forward and will be available
for deduction in future tax
years, subject to the annual
limitations applicable in those
tax years. Any non-deductible More details are available on
contributions will be available the SARS website: Home
for deduction against Office Expenses | South
retirement lump sums or African Revenue Service
annuity income on withdrawal (sars.gov.za).
or retirement from the fund.
8 | Completing the economic jigsaw

Medical and disability expenses

Taxpayers may deduct Taxpayers 65 years and older Taxpayers under the age of 65
from their tax liability a and those with disabilities under years may deduct an additional
the age of 65 years or with medical expenses tax credit
tax credit (i.e. a rebate) disabled dependents may (rebate) equal to 25% of the
of: deduct an additional medical sum of:
• R364 per month for each of expenses tax credit (rebate)
• qualifying medical expenses;
the first two beneficiaries equal to 33,3% of the sum of:
and
and • qualifying medical expenses;
• an amount by which the
• R246 per month for each and
contributions paid exceeds
additional beneficiary, • an amount by which the four times (4x) the medical
in respect of medical aid contributions paid exceed tax credits for the year, but
contributions. three times (3x) the medical limited to the amount which
tax credits for the year. exceeds 7,5% of taxable
income (excluding
retirement lump sums and
severance benefits).
Completing the economic jigsaw | 9
10 | Completing the economic jigsaw

Tax-free savings and

investment accounts
All returns received from tax free savings and investment accounts, such as interest, dividends and
capital gains, are 100% tax free.
The annual contribution limit is R36 000 from 1 March 2020.
The lifetime contribution limit is R500 000.
 Completing the economic jigsaw | 11

Taxation of lump sum benefits

Retirement fund lump sum benefits (retirement or death) and severance lump
sum benefits
The tax-free lump sum benefit upon death, retirement, withdrawal after reaching the age of 55, as well
as illness, accident, injury, incapacity or in respect of severance benefits (as defined in the Income Tax
Act), is R550 000. The tax rates are:

Taxable income Rates of tax

R1 – R550 000 0% of taxable income

R550 001 – R770 000 18% of taxable income above R550 000

R770 001 – R1 155 000 R39 600 + 27% of taxable income above R770 000

R1 155 001 and above R143 550 + 36% of taxable income above R1 155 000

Retirement fund lump sum withdrawal benefits

Retirement fund lump sum withdrawal benefits refer to lump sums from a pension, pension
preservation, provident, provident preservation or retirement annuity fund upon withdrawal from the
fund in circumstances that do not qualify for the above rates table. The tax rates are:

Taxable income Rates of tax

R1 – R27 500 0% of taxable income

R27 501 – R726 001 18% of taxable income above R27 500

R726 001 – R1 089 000 R125 730 + 27% of taxable income above R726 000

R1 089 001 and above R223 740 + 36% of taxable income above R1 089 000

These tax tables apply cumulatively to all lump sum benefits, and include:
• all other retirement fund lump sum withdrawal benefits accruing from March 2009;
• all retirement fund lump sum benefits accruing from October 2007; and
• all severance benefits accruing from March 2011.
12 | Completing the economic jigsaw

Companies and employers

Corporate tax rates

Type Rates of tax

Companies
Resident company 27%
Non-resident company 27%
Personal service provider company 27%
Gold mining, oil & gas companies and long-term insurance companies are subject to special rules
and tax rates.
Small business corporations (footnote 1)
R1 – R95 750 0% of taxable income
R95 751 – R365 000 7% of taxable income above R95 750
R18 848 plus 21% of taxable income above
R365 001 – R550 000
R365 000
R57 698 plus 27% of taxable income above
R550 001 and above
R550 000
Micro businesses (footnote 2)
R1 – R335 000 0% of taxable turnover
R335 001 – R500 000 1% of taxable turnover above R335 000
R1 650 plus 2% of taxable turnover above
R500 001 – R750 000
R500 000
R6 650 plus 3% of taxable turnover above
R750 001 and above
R750 000
Withholding taxes (footnote 3)
Dividends 20%
Interest paid to non-residents 15%
Royalties paid to non-residents 15%
Amounts paid to non-resident
15%
entertainers and sportspersons
Disposal of fixed property by non-residents Individuals: 7,5%, Companies: 10%, Trusts: 15%

1 Applicable for years of assessment ending on any date between 1 April 2025 and 31 March 2026.
2 Micro businesses have the option of making payments for turnover tax, VAT and employees’ tax bi-annually. Applicable in
respect of years of assessment that end on any date between 1 March 2025 and 28 February 2026.
3 Subject to double tax agreement relief if paid to a non-resident.
 Completing the economic jigsaw | 13

Withholding taxes
If the amount is paid to a non-resident, the applicable withholding tax rate may be reduced by the
provisions of an applicable Double Tax Agreement (DTA). The foreign recipient of the royalty, dividend
or the interest should provide a written declaration and undertaking to the payor, confirming that the
requirements to qualify for a reduced rate under a DTA have been met. These written declarations and
undertakings have to be renewed every five years.
14 | Completing the economic jigsaw

Which companies must

submit returns
The Commissioner annually gives public notice of the persons who are required to furnish returns for
the assessment of normal tax within the period prescribed in that notice (likely to be issued in June/July
2025).*
The following entities are currently required to submit annual income tax returns:
• every company or other juristic person, which is a resident and which derived gross income or
capital gains or losses of more than R1 000, had assets or liabilities of more than R1 000 or had
taxable income, taxable turnover, an assessed tax loss or an assessed capital loss;
• every trust which is a resident;
• every company, trust or other juristic person, which is not a resident, and
− which carried on a trade through a permanent establishment in South Africa;
− which derived income from a source in South Africa; or
− which derived any capital gain or capital loss from the disposal of an asset to which the Eighth
Schedule to the Income Tax Act applies;
• every company incorporated, established or formed in South Africa, but which is not a resident as a
result of the application of any DTA.
*A KPMG Tax Alert setting out the category of persons required to submit a return and any changes in
relation to the above requirements, will be issued at the time of publication of the public notice (once
available on the SARS website).
 Completing the economic jigsaw | 15

Capital gains tax –

Companies and trusts

Effective CGT rates

Inclusion Statutory Effective
Type of taxpayer
Rate Rate Rate
Other trusts i.e. trusts other than ‘special
80% 45% 36%
trusts’ as defined
Companies* (including personal service
provider companies and branches of
80% 27% 21,6%
non-resident companies)
Small business corporations 80% 0% – 27% 0% – 21,6%
16 | Completing the economic jigsaw

Payroll taxes and levies

Employees’ tax / Pay-As-You-Earn The monthly threshold increased to a maximum
(PAYE) threshold of R17 712 per month (R212 544 per
year) from 1 June 2021.
Resident employers, representative employers
and with effect from 22 December 2023, non- Employers (including non-resident employers)
resident employers who are conducting business not registered for PAYE or SDL purposes must
through a permanent establishment in South pay the contributions to the Unemployment
Africa, are required to withhold PAYE from all Insurance Commissioner.
remuneration paid to employees. With effect from 1 March 2018, foreign nationals
The PAYE must be paid to SARS by the 7th day working in South Africa and employees
of the month following the month in which the undergoing learnership training are subject to
remuneration is received. If the 7th falls on a UIF.
weekend or public holiday, the payment must be
made by the last business day before the 7th.
Skills Development Levy (SDL)
Employees’ tax and personal income tax
administration reforms are expected. Both resident and non-resident employers with a
payroll of more than R500 000 per year must
account for SDL at a rate of 1% of total
Unemployment Insurance Fund (UIF) remuneration paid to employees. This is an
employer contribution only.
UIF contributions are payable by both resident
and non-resident employers to SARS on a
monthly basis and are calculated at a rate of 2%
of remuneration paid or payable (1% employee
and 1% employer contribution, based on the
employee’s remuneration) to each employee
during the month.
 Completing the economic jigsaw | 17

Employment Tax Incentive (ETI)

The ETI was introduced with the objective of generating employment opportunities for young and less
experienced work seekers.
The incentive reduces the cost of hiring young people to employers through a cost-sharing mechanism
with government, while leaving the wage of the employee unaffected. Compliant employers are able to
reduce their PAYE liabilities by claiming ETI.
The ETI was implemented with effect from 1 January 2014 and will end on 28 February 2029.
Eligible employers can claim ETI for a maximum period of 24 qualifying months in relation to qualifying
employees.
Employers are able to claim ETI up to a maximum of:
• R1 500 per qualifying employee per month in the first twelve months and up to
• R750 per qualifying employee per month in the second twelve months.
Effective 1 April 2025, the formula to calculate the incentive and the eligible monthly remuneration
bands will be adjusted.
The incentive is nil for qualifying employees who earn R7 500 and more.

Monthly remuneration First 12 months Second 12 months

R0 to R1 999,99 75% of monthly remuneration 37,5% of monthly remuneration
R2 000 to R4 499,99 R1 500,00 R750

R1 500 – (0.75 x (monthly R750 – (0.375 x (monthly

R4 500 to R6 499,99
remuneration – R4 500)) remuneration – R4 500))

Effective 1 April 2025

Monthly remuneration First 12 months Second 12 months
R0 - R2 499,99 60% of monthly remuneration 30% of monthly remuneration
R2 500 - R5 499,99 R1 500 R750

R1 500 - (0.6 x (month R750 - (0.3 x (month

R5 500 - R7 499,99
remuneration - R5 500)) remuneration - R5 500))

Changes proposed per Chapter 4 page 42 Interpretation of the implied changes

ETI reimbursements are classified as refunds for purposes of the Tax Administration Act and
accordingly may be subject to the imposition of understatement penalties if ETI is claimed incorrectly.
To curb abuse of the ETI, punitive measures have been introduced.
18 | Completing the economic jigsaw

Value–Added Tax
• Standard rate:
– 16% (from 1 April 2026*)
– 15,5% (from 1 May 2025*)
– 15% (from 1 April 2018)
– 14% (until 31 March 2018)
*as proposed in the 2025 Budget

• Threshold for compulsory VAT registration: Taxable

supplies > R1 million during any 12-month period
• Voluntary VAT registration threshold: Taxable
supplies > R50 000 during any 12-month period
• VAT registration threshold for foreign suppliers of
“electronic services”:
– R50 000 (until 31 March 2019)
– R1 million (from 1 April 2019)
Completing the economic jigsaw | 19
20 | Completing the economic jigsaw

Corporate income tax

Third-party backed shares

Additional anti-avoidance measures will be introduced into section 8EA of the Income Tax Act.

Hybrid-equity instruments
The definition of “hybrid-equity instruments” in section 8E of the Income Tax Act will be amended to
address schemes that circumvent the application of the anti-avoidance provisions in relation to
preference shares.
 Completing the economic jigsaw | 21

Clarifying the order of shares in the listed company • Extending the carve-out to
set-off of the balance of prior to the asset-for-share section 23M in relation to
transaction. back-to-back lending
assessed losses and arrangements to
certain deductions arrangements where there
The current assessed loss Reviewing the asset-for- is no controlling relationship
rules limit the set-off of any share provisions and between the ultimate
balance of assessed losses to lending institution and the
amalgamation debtor.
80% of taxable income.
provisions in relation to
Deductions in respect of • Clarifying the application of
donations as well as transfers transactions involving
section 23M where no
from policyholder funds to the collective investment foreign exchange gain
corporate fund in terms of schemes accrues to the creditor to
section 29A of the Income Tax make it clear that the
Act are also limited with The asset-for-share provisions
in section 42 of the Income Tax underlying debt should first
reference to taxable income. be tested. If the underlying
Amendments will be introduced Act as well as the
amalgamation provisions in debt falls within the ambit of
to clarify whether the assessed section 23M, the foreign
losses limitation or limitation in section 44 may apply to the
transfer of interest in a exchange difference in
respect of donations / relation to the debt will also
policyholder fund transfers collective investment scheme
(CIS) allowing the tax neutral be limited.
must be applied first.
transfer of equities to the CIS. • A review of the impact of the
The subsequent disposal of the 2024 amendments to
equities by the CIS is however section 23N in relation to the
Clarifying the roll-over not taxed in terms of paragraph definition of "adjusted
relief for listed shares in 61 of the Eighth Schedule. The taxable income" and the
asset-for-share provisions of section 42 and 44 formula to limit the interest
transactions in relation to CIS’s will be deduction with reference to
reviewed. the definition of "adjusted
The current provisions of taxable income" and the
section 42 of the Income Tax formula to limit interest
Act do not roll over the
Clarifying the interest deduction applied in section
historical base cost of listed 23M. The proposed effective
company shares where the limitation rules
date of these amendments
company acquiring the listed Various amendments are is currently 1 January 2027.
company shares holds at least proposed to the interest Any changes in this regard
either 25% or 35% of the listed limitation provisions contained will form part of the 2026
company shares following the in section 23N and section 23M Budget proposals.
transaction. This effectively of the Income Tax Act. These
allows the acquiror to have a include:
step up in base cost.
• Limiting the definition of
The provisions of section 42 of "interest" to be used in the
the Income Tax Act will be calculation of "adjusted
amended to reflect the policy taxable income" in section
intention that the regime for 23M to interest as defined in
listed company shares should section 24J of the Income
only apply to shareholders Tax Act.
holding less than 20% of the
22 | Completing the economic jigsaw

Other incentives
Incentives review
The following changes were proposed:
• The urban development zone tax incentive sunset date will be extended by five years from
31 March 2025 to 31 March 2030.
• The section 12L energy-efficiency tax incentive sunset date will be extended by five years from
1 January 2026 to 31 December 2030.
 Completing the economic jigsaw | 23

Provisional tax
Provisional tax – Provisional tax returns showing The 20% underestimation
individuals / companies an estimation of total taxable penalty will only be triggered in
income for the year of the following scenarios:
• First payment: To be made assessment are required from
within 6 months from the • When a taxpayer reports an
provisional taxpayers.
start of the tax year. estimate of taxable income
Deceased estates are not of less than R1 million for
• Second payment: To be provisional taxpayers. the purposes of the second
made by the last day of the provisional tax return (form
tax year. IRP6) and that estimate of
• Third payment: Voluntary Provisional tax – taxable income is less than
payment to be made within penalties on late 90% of the final assessed
7 months after the tax year taxable income per the
payment, late assessment (form ITA34)
end (if tax year end is 28/29 submission and
February), or to be made and is less than the “basic
within 6 months after year
underestimation amount” (i.e. the taxable
end (if tax year end falls on income per the most recent
The following penalties may be
any other date). previous assessment
imposed:
issued).
A provisional taxpayer is any • A 10% penalty for the late
person who earns income by • When a taxpayer reports an
payment of the amount of
way of remuneration from an estimate of taxable income
provisional tax due.
unregistered employer, or of more than R1 million for
income that is not • A 20% penalty for the the purposes of the second
remuneration or an allowance underestimation of the provisional tax return (form
or advance payable by the amount of provisional tax IRP6) and that estimate of
person’s principal. An due. taxable income is less than
80% of the taxable income
individual is not required to pay • The 20% underestimation
provisional tax if the individual per the final assessment
penalty is reduced by the
does not carry on any business (form ITA34).
amount of any late payment
and the individual’s taxable penalty imposed. Both of
income: these penalties constitute
• will not exceed the tax percentage based penalties
threshold for the tax year; or in terms of section 213 of
the Tax Administration Act.
• from interest, dividends,
foreign dividends, rental
from the letting of fixed
property will be R30 000 or
less for the tax year.
24 | Completing the economic jigsaw

International Tax
Refining the definition it easier to classify dividends section 9H exit tax be triggered.
of “equity shares” to and repatriation of capital from This reform seeks to address
foreign companies, therefore the current loophole for
include foreign giving taxpayers with overseas strategic cross-border
company shares assets more certainty. restructuring and guarantee
The Income Tax Act defines uniform application of the exit
"dividends" and "return of tax charge, therefore
capital" only in reference to Closing the exit charge preventing further erosion of
amounts transferred by South loophole in controlled the base.
African residents. For foreign company rules
payments transferred by
When a foreign company Adjusting the
foreign companies, separate
ceases to be a controlled
definitions apply for "foreign comparable tax
foreign company (CFC),
dividends" and "foreign return
section 9H of the Income Tax exemption to account
of capital." Currently, the for shareholder tax
Act triggers an "exit charge". In
definition of an "equity share"
terms of this clause, the foreign refunds
applies to shares issued by
company is deemed to have In terms of South Africa's CFC
South African companies, in
disposed of all of its laws, the net income of a CFC
other words, companies that
international assets shortly is not imputed, should the CFC
are tax resident for South
before it loses CFC status, pay at least 67.5% of the South
African tax purposes. Foreign
therefore creating a deemed African tax that would have
company shares are not
tax liability on any capital gains. been due if the CFC been a tax
categorised as equity shares
Section 9D(2A) requires that a resident of South Africa. This
for tax purposes. This causes
CFC's "net income" be exemption guarantees that
doubt about the tax definition
computed as though the CFC CFCs operating in countries
for amounts acquired from or
was a taxpayer with South with tax rates equivalent or
transferred to foreign
African tax residence (in terms similar to South Africa are not
companies.
of specific sections in South liable to additional taxes in
The exclusion of foreign African domestic tax law). South Africa.
company shares from the These clauses are meant to
“equity share” definition means prevent tax avoidance should a However, the current
that amounts distributed by CFC exit the South African tax comparable tax exemption
foreign companies may not base. ignores the tax systems of
qualify for the same tax countries allowing refunds to
Certain arrangements between some shareholders for tax paid
treatment as those distributed
South African holding by the CFC when declaring
by South African companies.
companies and their foreign dividends. Consequently, the
This results in different tax
subsidiaries which are CFCs, integrity of the comparable tax
treatment of local and
have been found to enable a exemption may be
international equity
CFC to buy all the shares in the compromised if a CFC initially
instruments, which may deter
South African holding company pays tax that exceeds the
cross-border investments and
without incurring an exit tax. 67.5% threshold, as a
complicate tax compliance for
This creates a loophole subsequent shareholder refund
multinational companies.
allowing taxpayers to move could reduce the effective tax
National Treasury suggests to funds abroad free from the paid by the CFC. This leaves a
define "equity share" to include expected capital gains tax possible gap wherein some
shares in a foreign company. implications. foreign tax systems may
This would match the tax
National Treasury suggests artificially fulfil the exemption
treatment of domestic and
changing the Income Tax Act to requirements, even with a
foreign equity instruments,
guarantee that, should a CFC reduced total tax payment.
guaranteeing equal treatment
purchase shares in its South
of funds transferred by foreign
African holding company, the
companies. It would also make
 Completing the economic jigsaw | 25

Adjusting the section 6quat(1C) is meant to resident beneficiaries is

comparable tax offer double tax relief, this potentially inefficient where
creates a conflict because section 7 and 25B interact.
exemption to account taxpayers generating
for shareholder tax Therefore, National Treasury
employment income subject to
proposes reviewing section 7
refunds (cont.) foreign tax may not be able to
and 25B to identify and resolve
claim a deduction for those
National Treasury suggests unintended tax consequences
foreign taxes. This discrepancy
changing the CFC regulations in relation to non-resident
causes an unintentional limit on
to consider tax refunds earned beneficiaries of a trust.
the relief accessible for foreign
by shareholders when
taxes paid on employment
determining whether a CFC
income.
satisfies the 67.5% criteria for Refining deferral of
the comparable tax exemption. To resolve this, National
This adjustment seeks to avoid Treasury suggests to change
exchange difference
artificial qualification for the section 23(m) to allow rules on debt between
exemption and guarantee that deductions in terms of section related parties
the equivalent tax exemption 6quat(1C). This change will
Section 24I of the Income Tax
fairly shows the actual tax paid guarantee that taxpayers
Act deals with how gains and
by the CFC. receiving employment income
losses from foreign exchange
subject to foreign tax can claim
transactions are taxed. This
a deduction for those taxes,
includes foreign-denominated
Aligning foreign tax therefore matching the
debts.
deductions in terms of management of foreign tax
deductions with the objective of Currently, the tax on foreign
section 6quat with relief from double taxation. exchange differences is in
employment Income some cases postponed until the
deductions debt is actually settled or
Taxation of trusts and realised. This means that the
When calculating taxable
their beneficiaries associated gains or losses are
income, section 6quat(1C) of
not taxed until the debt is
the Income Tax Act enables a Section 7 and 25B of the settled or realised.
taxpayer to subtract foreign Income Tax Act deal with the
taxes paid or proven to be taxation of trusts, particularly in National Treasury proposes
payable to a foreign authority. relation to the taxation of that the tax on the foreign
This clause permits a income received by or from a exchange differences would
deduction for taxes paid trust. also be triggered when only
abroad, therefore offering relief part of the foreign exchange
from double taxation. The flow-through principle's debt is realised or settled
Nonetheless, section 23(m) of limitation to resident during the year of assessment.
the Income Tax Act prevents beneficiaries means non-
resident beneficiaries' income Furthermore, the proposal
deductions against income
or gains may not be taxed the seeks to clarify the treatment of
earned from employment,
same. This could lead to such debt in financial
subject to specific limitations.
double taxation or income statements, ensuring
The list of exclusions under recognition inconsistencies. consistent classification and tax
section 23(m) does not treatment of these debts for
currently contain the deduction National Treasury is of the view accounting purposes.
for foreign taxes allowed under that the tax treatment of vested
section 6quat(1C). Although income and assets for non-
26 | Completing the economic jigsaw

Customs and excise

Customs and excise • Ad valorem excise duties agreement.
rates increases on smartphones: With The proposed amendment
effect from 1 April 2025, is aimed at the
Customs and excise rate government proposes that implementation of the new
increases: the ad valorem excise rate SARS electronic traveller
• Specific excise duties: of 9% that applies to management system
With effect from 12 March smartphones will only be (amongst others).
applied to smartphones with
2025, specific excise duties • Customs voluntary
are increased. Alcoholic a price paid greater than
disclosure programme:
beverages increased by R2 500 at the time of export
National Treasury proposes
6,75%, (while traditional to South Africa.
that the Customs and
African beer and beer • Adjustment to the diesel Excise Act be amended to
powder remains refund for the primary provide for a customs and
unchanged). The rate of sector: National Treasury excise voluntary disclosure
duty on cigarettes, cigarette proposes to increase the programme.
tobacco, and electronic threshold for a refund of the
nicotine and non-nicotine general fuel levy and RAF
• Timing of adjustment of
delivery systems (“vaping”) bill of entry: National
levy from 80% of eligible
will increase by 4,75%, Treasury proposes to
diesel purchases to 100%
whereas the rate of duty on amend section 40 of the
of all eligible diesel
pipe tobacco and cigars will Customs and Excise Act to
purchases declared to
increase by 6,75%. allow for flexibility in relation
SARS, effective from 1 April
to the timing of the
• General Fuel Levy & Road 2026.
adjustment of the bill of
Accident Fund Levy: The • Excise duty increases: entry. This may include, for
General Fuel Levy and the To ease the administrative example, the use of a single
Road Accident Fund Levy burden of implementing consolidated document to
will remain unchanged. adjustments on Budget be submitted to adjust
• Carbon tax: With effect Day, in future years various affected bills of
from 1 January 2025, the adjustments to excise entry.
duties will take effect from
carbon tax rate increased to • Body-worn cameras:
R236 per tonne of carbon 1 April.
National Treasury is
dioxide equivalent. The investigating issuing body-
carbon fuel levy for 2025 worn cameras to customs
will increase to 14c/litre for Legislative amendment
officers to promote trust,
petrol and 17c/litre for proposals:
transparency and
diesel from 2 April 2025. • Delegation of functions of accountability in relation to
The carbon tax cost customs officers and the enforcement functions
recovery quantum for the designation of persons as performed by customs
liquid fuels refinery sector customs officers: National officers.
increased to 0.99c/litre from Treasury proposes to
1 January 2025. • Diesel refund: National
amend the Customs and
Treasury proposes to
• Health promotion levy: No Excise Act to allow for the
amend the Customs and
increase in the health delegation of functions of
Excise Act to facilitate the
promotion levy will take customs officers to persons
implementation of the new
effect in 2025 to allow the in the service of an organ of
diesel refund system.
sugar industry more time to state or institution with
restructure in response to whom the Commissioner
regional competition. has concluded an
 Completing the economic jigsaw | 27

Customs and excise

rates increases (cont.)
• Dutiability of waste
derived from processing
imported goods in
manufacturing plants:
National Treasury is
considering raising duties
on waste derived from
processing imported goods
in a manufacturing plant to
provide for relief when
waste is disposed of in a
sustainable and
environmentally friendly
manner, such as recycling.
• Movement of fuel
products: National
Treasury proposes to
review the legislation
pertaining to the fuel
industry to align it with
changes in this industry and
to facilitate the movement
and storage of fuel
products.
28 | Completing the economic jigsaw

Environmental taxes
Carbon tax • Increase the carbon offset It is therefore proposed to
allowance by 5 percentage change the carbon dioxide
Carbon tax rate increase points from 1 January 2026. factor for sub-bituminous coal
The Carbon Tax Act specifies from 96 100 to 96 777
• Retain the 30% trade-
that the initial rate of carbon tax kgCO2/TJ and for other
intensity threshold used to
of R120 per tonne will be bituminous coal from 94 600 to
determine the trade
increased by consumer price 82 912 kgCO2/TJ in Schedule
exposure allowance.
inflation (CPI) +2% per year 1 of the Carbon Tax Act; the
until 31 December 2022, • Maintain the basic tax-free net calorific value to be used to
whereafter the rate of carbon allowance until convert to tonnes of emissions
tax will be increased only by 31 December 2030. should be 19.14 MJ/kg for sub-
CPI. bituminous coal and 26.51
• Extend the carbon budget
MJ/kg for other bituminous
In line with this, the carbon tax allowance for the voluntary
coal; and the carbon dioxide
rate is increased with 24,2% carbon budget system until
emission factor for natural gas
from R190 to R236 per tonne of 31 December 2025.
from 56 100 to 55 709
CO2e. • Introduce a greenhouse gas kgCO2/TJ, with a net calorific
The amendments will take emission intensity value of 37.01 MJ/m3.
effect from 1 January 2025. benchmark of 0.94
These proposals are set out in
tCO2e/MWh for the
Annexure C to the 2025 Budget
electricity sector from
Review and the proposed
Carbon fuel levy and carbon 1 January 2026.
amendments will be effective
tax cost recovery • Extend the utilisation period from 1 January 2026.
Effective 2 April 2025, the for carbon offsets until
carbon fuel levy will increase to 31 December 2028.
14c/litre for petrol and 17c/litre Fugitive emissions formula
for diesel. Section 4(2)(b) of the Carbon
Carbon Tax - Aligning schedule
The carbon tax cost recovery Tax Act provides the formulas
1 of the Carbon Tax Act
quantum for the liquid fuels to be used by companies to
sector increased from It was announced in the 2025 calculate the carbon dioxide
0.69c/litre to 0.99c/litre, Budget that the Department of equivalent (CO2e) emission
effective 1 January 2025. Forestry, Fisheries and the factors for fugitive emission
Environment (DFFE) approved activities which applies to oil,
country-specific Tier 2 emission natural gas and coal mining
Carbon tax - Second phase factors for natural gas and coal and handling.
fuel types to be used by data
A discussion paper outlining During the 2023 and 2024
providers to estimate and
proposals for the second phase Budget Speech, new fugitive
report stationary and non-
of the carbon tax was published emission categories were
stationary fuel combustion
for public comment in added. To provide clarity to
emissions.
November 2024. The main taxpayers, it is proposed in the
proposals for carbon tax are to: To ensure alignment between 2025 Budget Speech that the
the Carbon Tax Act and the formula for oil and natural gas
• Extend the section 12L DFFE-approved emission should be used to calculate the
allowance to 31 December factors, it was announced that CO2e for solid fuel
2030. changes to the carbon dioxide transformation (IPCC code
• Extend the commitment to emission factors and net 1B1C) activities, including coke
electricity price neutrality to calorific values for the relevant and charcoal production.
31 December 2030. fuel types are necessary.
 Completing the economic jigsaw | 29

Carbon tax (cont.)

Fugitive emissions formula (cont.)
A new formula will be considered for calculating the emission factors for the coal to liquid fuel and
charcoal production activities where calorific values may be required to convert emissions to tonnes.

Sequestration deduction
A deduction is provided for carbon dioxide sequestration in forestry plantations. It is proposed to
extend the sequestration deduction for the paper and pulp sector to third-party timber sequestration
measured and verified in line with the approved protocol effective from 1 January 2026. This extension
aims to incentivise informal growers to produce timber which will in turn contribute to economic
development and the livelihoods of the producers.
30 | Completing the economic jigsaw

Transfer duty and Securities

Transfer Tax
Securities Transfer Tax (STT)
This tax is imposed at a rate of 0,25% on the transfer of listed or unlisted securities.

Transfer duty
Payable on transactions that are not subject to VAT (including zero-rated VAT)

Value of property Rates payable

R1 – R1 210 000 0% of the value
R1 210 001 – R1 663 800 3% of the value above R1 210 000
R1 663 801 – R2 329 300 R13 614 plus 6% of the value above R1 663 800
R2 329 001 – R2 994 800 R53 544 plus 8% of the value above R2 329 300
R2 994 801 – R13 310 000 R106 784 plus 11% of the value above R2 994 800
R13 310 001 and above R1 241 456 plus 13% of the value above R13 310 000
 Completing the economic jigsaw | 31

Estate duty and donations tax

Estate duty duty, as well as deductions for liabilities,
bequests to Public Benefit Organisations (PBOs)
Estate duty is payable on: and property accruing to surviving spouses.
• “Property” and “deemed property” (less
allowable deductions) for persons who are
“ordinarily tax resident” in South Africa. Donations tax
• “Property” and “deemed property” (less A rate of 20% will be payable on the value of
allowable deductions) as relates to persons property donated. Donations exceeding
who are not tax resident in South Africa. R30 million in value will be taxed at a rate of
25%.
Estate Duty | South African Revenue Service
The first R100 000 of property donated in each
Estate duty is levied on the “dutiable value” of an
year by a natural person is exempt from
estate at a rate of 20% on the first
donations tax. For taxpayers who are not natural
R30 million. A tax rate of 25% will apply where
persons, exempt donations are limited to casual
the dutiable value of an estate is above R30
gifts not exceeding a total of R10 000 per
million.
annum. Donations between spouses, South
A basic deduction of R3.5 million is allowed in African group companies and to certain PBOs
the determination of an estate’s liability for estate are exempt from donations tax.
32 | Completing the economic jigsaw

Administrative non-
compliance penalties
Fixed amount penalties
Administrative non-compliance is the
Taxable income for preceding Monthly failure to comply with an obligation
year penalty imposed by or under a tax Act and listed in
Assessed loss R 250 a public notice by the Commissioner.
Failures attracting fixed amount penalties
R 0 – R 250 000 R 250 currently include:
R 250 001 – R 500 000 R 500 • The failure by a natural person to submit
an income tax return (subject to further
R 500 001 – R 1 000 000 R 1 000
conditions).
R 1 000 001 – R 5 000 000 R 2 000 • The failure by a reporting financial
R 5 000 001 – R 10 000 000 R 4 000 institution to submit returns in relation to
the intergovernmental agreement to
R 10 000 001 – R 50 000 000 R 8 000 implement the United States of
America’s Foreign Account Tax
Above R 50 000 000 R 16 000
Compliance Act.
Maximum successive penalties: 36 months (SARS in • Certain incidences of non-compliance
possession of address) or 48 months (SARS not in with the Common Reporting Standard
possession of address) (CRS) Regulations (e.g. failure by a
reporting financial institution to submit a
return as required, or to remedy the
partial or non-implementation of a due
diligence required under the CRS
Regulations within 60 days, etc.).
• Failure by a company to submit an
income tax return as required under the
Income Tax Act for years of assessment
ending during the 2009 and subsequent
calendar years, where SARS has issued
the company with a final demand and
such company has failed to submit the
return within 21 business days of the
date of issue of the final demand.
 Completing the economic jigsaw | 33

Understatement percentage-based penalties

Voluntary Voluntary
disclosure disclosure
Obstructive
Behaviour Standard case after before
or repeat case
notification of notification of
audit audit

Substantial
understatement 10% 20% 5% 0%

Reasonable care not

taken in completing return 25% 50% 15% 0%

No reasonable grounds
for tax position 50% 75% 25% 0%

Impermissible avoidance
arrangement 75% 100% 35% 0%

Gross negligence 100% 125% 50% 5%

Intentional tax evasion 150% 200% 75% 10%

“Understatement” means any prejudice to SARS or the fiscus as a result of:

• A failure to submit a return
• An omission from a return
• An incorrect statement in a return
• Failure to pay correct amount of tax if no return is required
• An impermissible avoidance arrangement
The burden of proving the facts on which SARS based the imposition
of the understatement penalty, is on SARS.
34 | Completing the economic jigsaw

Voluntary Disclosure Programme

Provisions for a general Voluntary Disclosure Programme (VDP) are contained in the Tax
Administration Act, in terms of which taxpayers (corporate entities, individuals, etc.), can approach
SARS with a view to regularise their tax affairs, with the prospect of remittance of certain penalties.
It was announced in the 2021 budget that the VDP provisions would be reviewed to ensure that the
provisions align with strategic and policy objectives of the programme. There has been no subsequent
announcement regarding the progress of the review of the VDP provisions.
Completing the economic jigsaw | 35
36 | Completing the economic jigsaw

SARS interest rates

Effective 1 February 2025

Fringe benefits – interest free or low interest loans 8,5% p.a.

Effective 1 March 2025

Late or underpayments of tax 11,25% p.a.

Refund of overpayments of provisional and employees’ tax 7,25% p.a.

Refund of tax on successful appeal, or where the appeal was

11,25% p.a.
conceded by SARS

Refund of VAT after prescribed period 11,25% p.a.

Late payments of VAT 11,25% p.a.

Customs and Excise Duties 11,25% p.a.

 Completing the economic jigsaw | 37

Future-ready Tax
A changing landscape –
Completing the economic jigsaw
Tax is no longer (only) a compliance function of business, but has become a
Strategic Asset
There is no shortage of challenges and opportunities facing today’s tax functions. Carrying on as in
the past is no longer a viable option. The traditional tax function is undergoing a transformation. This
is a response to the constantly evolving business, economic and technological developments
happening as we speak.
Tax authorities around the world are moving towards digitised reporting requirements and seeking to
collect tax information directly from your company’s accounting system (ERP) in real-time. Even
locally there is a fundamental shift in how data is being collected and exchanged. We are moving
away from information being “pushed” to tax authorities towards a position where data is “pulled” by
them.
From SARS’s 2024 Vision Statement it is clear that they are moving towards risk-based reviews, that
is not return driven, using data (from ERP systems and other third parties) and a stronger
technological backbone. Hiring and upskilling resources with data analytical and data management
skills are a priority for SARS. Having a technologically inclined workforce that can rely on factual
insight directly from data in real time, requiring limited interaction with business on tax, will bring
significant efficiency and growth opportunities for tax authorities.

KPMG’s response:
Tax Reimagined – KPMG’s framework where we have combined our technology, transformation and
compliance capabilities to meet your unique tax business needs.
• Deploying our solution architects and leveraging this framework, we assist businesses to develop
a strategy for your tax function and design a “future-ready” technology-enabled target operating
model (TOM) to reduce costs, improve quality and unlock value from your tax and statutory
function.
• Every company is unique. Every tax function is too. A bespoke KPMG Tax Reimagined workshop
gives you the opportunity to imagine the model that works for you, then brings it to life. Our rapid
diagnostics and wealth of benchmarking data can take you from dreaming of the possible to the
foundations of a tangible business case in less time than you think.
38 | Completing the economic jigsaw

A changing landscape - Harnessing

the power of technology and
unlocking the value of a company’s
data
Data has become a core
asset of the 21st century tax
function
Tax executives need to look beyond
the implementation of a specific
compliance tool or technology
solution, also considering
accessibility, accuracy and
completeness of tax data. The
concept of “compliance-by-design”,
whereby tax data is ready for
reporting in real-time, has become
a critical success factor in today’s
tax world.

For more information, please

contact:

Madelein van Zyl,

Head of Tax Technology and
Transformation
M: +27 82 718 8810
E: madelein.vanzyl@kpmg.co.za

Jolene Hill
Lead: Tax Reimagined
M: +27 82 718 8756
E: jolene.hill@kpmg.co.za
 Completing the economic jigsaw | 39

ContactUs:
Joubert Botha Anton De Bruyn
Head of Tax and Legal Head of Legal
Head of Corporate Tax M: +27 82 719 0317
M: +27 83 456 7734 E: anton.debruyn@kpmg.co.za
E: joubert.botha@kpmg.co.za

Carolyn Chambers
Andre Meyburgh Head of Global Mobility Services &
Head of Indirect Tax Employment Tax Advisory
M: +27 82 851 6587 M: +27 83 440 5564
E: andre.meyburgh@kpmg.co.za E: carolyn.chambers@kpmg.co.za

Venter Labuschagne
Head of Customs and Excise Zohra De Villiers
M: +27 83 677 7744 Head of Tax and Legal: Cape Town
E: venter.labuschagne@kpmg.co.za M: +27 82 719 0279
E: zohra.devilliers@kpmg.co.za
Vian Strydom
Head of Tax Management Services
M: +27 82 564 9118 Mohammed Maiter
E: vian.strydom@kpmg.co.za Tax & Legal Lead: Durban
M: +27 66 010 2425
E: mohammed.maiter@kpmg.co.za
Natasha Vaidanis
Head of International Tax and
Transfer Pricing Tanette Nell
M: +27 82 458 1043 Tax & Legal Lead: Gqeberha
E: natasha.vaidanis@kpmg.co.za M: +27 82 719 2179
E: tanette.nell@kpmg.co.za

Madelein van Zyl,

Head of Tax Technology Jolene Hill
and Transformation Lead: Tax Reimagined
M: +27 82 718 8810 M: +27 82 718 8756
E: madelein.vanzyl@kpmg.co.za E: jolene.hill@kpmg.co.za
 kpmg.com/socialmedia

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