2026 Tax Policy Proposals

Tax highlights include the following:

• gross tax revenue for 2025/2026 is revised upwardly by ZAR 21.3 billion (mainly because of higher net VAT collections, corporate income tax, dividends tax, and taxes on property). Mining tax collections were higher due to higher gold and platinum group metal prices. Revenue heads forecast to underperform in 2025/2026 include personal income tax, specific excise duties, and customs duties;  
• the ZAR 20 billion tax increase previously forecast is withdrawn;
• personal income tax brackets and medical tax credits will be adjusted for inflation;
• various tax thresholds and monetary limits have also been adjusted to assist small businesses and encourage savings.

The following tax increases have been announced (with effect from 1 April 2026):

• a 9 cent per litre increase in the general fuel levy (8 cents for diesel);
• a 7 cent per litre increase in the Road Accident Fund levy (petrol and diesel);
• a 5 cent per litre increase in Carbon Tax (6 cents for diesel);
• excise duties on alcoholic beverages will increase in line with the inflation forecast of 3.4 per cent;
• excise duties on tobacco products (including electronic nicotine and non-nicotine delivery systems) will increase in line with expected inflation.

The carbon tax rate increased from ZAR 236 to ZAR308 per tonne of carbon dioxide equivalent (with effect from 1 January 2026).

Corporate income tax

Corporate tax policy proposals and developments include:

• increasing the donations tax exemption for entities to ZAR 20 000 per tax year;
• increasing the annual turnover limit for turnover tax from ZAR 1 million to ZAR 2.3 million and increasing the turnover tax monetary bands;
• reviewing the urban development zone tax incentive to better support affordable housing developments (in areas that are close to jobs, public transport and essential services);
• implementation of updated global minimum tax rules;
• assessing profit shifting by qualifying companies in special economic zones to connected persons outside the zones through market related pricing assessments (instead of disqualification by reference to the percentage of gross income or expenditure arising from transactions with such connected persons).
• withdrawing the proposed alignment (scheduled from 1 January 2027) of the formulas in the rules limiting interest deductibility in respect of acquisition transactions and re-organisation transactions (used in debt push down structures) with the formula limiting interest deductibility in respect of funding from exempt/partially exempt shareholders. The rationale is because the rules and transactions targeted are distinct;
• aligning the tax treatment of insurance liabilities transferred between short term insurers with the requirements of IFRS 17.

International tax

An amendment is proposed to resolve currency translation anomalies where a domestic treasury management company is the resident shareholder of a controlled foreign company. This relates to the translation of the controlled foreign company’s functional currency to an amount of net income in ZAR for the shareholder under controlled foreign company rules, re-translation into the domestic treasury management company’s functional currency under currency translation rules, and then re-translation to ZAR.

Incentives

The mining fund rehabilitation regime (deductible contributions to the fund and tax exempt growth within the fund) is to be extended to allow similar treatment for nuclear facilities (on decommissioning/closure).

Individuals

Thresholds relevant to individual taxpayers are to increase from 1 March 2026 as follows:

• the annual turnover limit for turnover tax is to increase from ZAR 1 million to ZAR 2.3 million. This ensures that small businesses are not disqualified through the effects of inflation and that more businesses can qualify;
• turnover tax monetary bands are to increase;
• increasing the market value limit of all assets of a small business to ZAR 15 million from ZAR 10 million. Owners of small businesses can disregard capital gains on disposal of active business assets owned in an individual, partner, or shareholder capacity (subject to certain requirements).  The amount of the capital gain to be disregarded is also to be increased from ZAR 1.8 million to ZAR 2.7 million;
• the capital gains tax exclusion applicable at death is to increase from ZAR 300 000 to ZAR 440 000;
• the capital gain exclusion in respect of the disposal of a primary residence is to increase from ZAR 2 million to ZAR 3 million;
• the capital gains tax annual exclusion is to increase from ZAR 40 000 to ZAR 50 000;
• the tax exempt donation amount has been increased to ZAR 150 000 from ZAR 100 000;
• the tax free annual savings limit is to increase from ZAR 36 000 to ZAR 46 000 to encourage savings;
• the monetary limit on tax deductible retirement fund contributions is to increase from ZAR 350 000 to ZAR 430 000;
• the retirement interest de minimis threshold for annuitisation is to increase from ZAR 247 500 to ZAR 360 000;
• the living annuity commutation amount is to increase from ZAR 125 000 to ZAR 150 000;
• the annual remuneration threshold for bursaries/scholarships to be exempt is to increase from ZAR 600 000 to ZAR 900 000 (for all employees);
• the annual threshold for tax exempt bursaries and scholarships is to increase from ZAR 20 000 to ZAR 30 000 (primary/secondary education) and to ZAR 90 000 (tertiary education);
• low-interest/interest free loans from employers to employees to acquire residential property should not be treated as a taxable fringe benefit if the employee's remuneration proxy does not exceed ZAR 360 ,000 per annum, and the property market value is under ZAR 650 000;
• the maximum compensation exemption for employees dying in fulfilment of duties is to increase from ZAR 300 000 to ZAR 800 000;
• the tax exempt amount for awards for bravery and long service is to increase from ZAR 5 000 to ZAR 16 000.

Other tax changes impacting individuals include the following:

• investment scheme returns generated by regular collective investment schemes and retail investment hedge funds will be taxed as capital (rather than income) to encourage savings and provide tax certainty. Qualified investment hedge funds will be excluded from this framework for which separate treatment will apply;
• it is proposed that the rollover rules applicable to trading stock, livestock and capital assets (in respect of transfers between spouses) be extended to cover recoupment of capital allowances and to provide for the carryover of accumulated allowances to the transferee spouse;
• the medical scheme fees tax credit will, subject to certain requirements, be extended to cover members of certain statutory medical schemes who are currently excluded;
• the definition of living annuity will be amended to provide that the de minimis commutation limit be determined cumulatively where an annuitant holds multiple living annuities with the same insurer or fund.

Value-Added Tax

It is proposed that:

• the voluntary VAT registration threshold increase from ZAR 50 000 to ZAR 120 000 in a 12 month period (from 1 April 2026);
• the compulsory VAT registration threshold increase from ZAR 1 million to ZAR 2.3 million in a 12 month period (from 1 April 2026);
• the zero-rating provision in section 11(2)(k) of the VAT Act is to be amended to clarify that services must be physically rendered in a customs controlled area in order to qualify for the zero rating provided by the provision;
• the zero rating of the supply gold in specific forms (including bars and blank coins) to the South African Reserve Bank, the South African Mint Company, and banks registered under the Banks Act is to be repealed because of onerous tracing requirements for refineries and SARS;   
• notional input tax deductions in respect of the acquisition of second-hand goods is to be limited to a tax period no later than the tax period in which the supply of second-hand goods takes place (to avoid losses to the fiscus if such goods are zero rated on export and thereafter a notional input tax deduction is claimed);
• intermediaries in the supply of electronic services will be required to account for VAT unless there is an agreement with the principal to the contrary (this is to avoid SARS having to engage the principal to recover VAT and because intermediaries may have difficulty in entering into agreements with small foreign electronic service principals who are unlikely to be VAT compliant);
• non-vendor lessors will be required to account for, and declare VAT, in respect of leasehold improvements effected by a VAT registered vendor.

Customs

Due to the launch of an electronic ATA Carnet Project (paper form ATA carnets enable the temporary admission of commercial samples, professional equipment and exhibition items), amendments are proposed to enable the Commissioner to issue rules relating to the issue, use and submission of international carnets.

Section 75(10) of the Customs & Excise Act is to be amended to provide criteria for the exercise of discretion to exempt or condone non-compliance of persons who fail to meet conditions or requirements prescribed by rule or in the notes to Schedules 3, 4 and 6 to such Act.

Taxing electronic heated products based on tobacco content (weight – per kilogram net) instead of by stick (quantity – per 10 sticks) is proposed to reduce industry’s ability to control the tax base and to encourage healthier consumer choice. 

Tax administration

Tax administration proposals include the following:

• fully exempt and partially exempt companies will be excluded from being classified as provisional taxpayers. This provides welcome certainty;
• timely payment of provisional tax is required in order for same to assist with underestimation penalties (with effect from 25 February 2026);
• the ZAR 1 million cap entitling taxpayer’s to determine a provisional tax estimate based on a historic assessment (basic amount) is to be increased to ZAR 1.8 million
• the obligation to withhold employees’ tax by non-resident employers conducting business through a permanent establishment in South Africa will apply if, additionally, the employee is effectively connected with the permanent establishment in South Africa. This assists limit the scope of the withholding obligation;
• documentation requirements for VAT vendors who deal in second hand goods is to be expanded to include documentation requirements prescribed by the Second Hand Goods Act and its regulations (to mitigate risk of notional input tax fraud). This amendment runs contrary to compliance relief for small businesses but the fiscus is concerned with fraudulent deductions given related amendments;
• tax invoices issued by suppliers of second-hand goods, in respect of which notional input tax was claimed, must reflect the purchase price paid on acquisition and the amount of notional input tax previously claimed. This would mean disclosure to acquirers of second-hand goods from such suppliers;
• extending VAT return filing to the last business day of the month for non-eFilers (instead of the 25^th day of the month) means more time to attend to VAT returns;
• permitting pre and post screening of tax refunds by banks to detect suspicious tax refund deposits. This may assist in speeding up legitimate VAT refunds;
• permitting voluntary disclosure relief applicants to simultaneously apply for remission of interest under the provisions of the relevant tax Act in respect of disclosed default;
• entitling a taxpayer to be reflected as compliant pending the outcome of a request for remission of penalties;
• reducing the period during which no collection steps may be taken by SARS, following rejection of a request for remission of penalties, to 10 business days.

Other taxes

• Diamond producers are exempt from the 5% export levy if they meet local sale requirements (which depend on producer size). Government is proposing to lower the threshold separating large and medium producers from ZAR 3 billion to ZAR 2 billion and allowing large producers to choose between selling 15 per cent locally and offering the remaining output to the Diamond Exchange and Export Centre, or selling 40 per cent locally and being exempt from offering the remaining production to the Centre.

Exchange control

From an exchange control perspective:

• the interest rate cap on inward foreign loans is removed (subject to loans being market related and reported to the South African Reserve Bank);
• the single discretionary limit for private individuals is increased from ZAR 1 million to ZAR 2 million per calendar year via Authorised Dealers for all purposes (including travel, gifts, remittances, investments and donations). Permitted single discretionary allowance transfers via Authorised Dealers in foreign exchange with limited authority are also increased from ZAR 1 million to ZAR 2 million;
• the limit for miscellaneous imports, services or subscription payments made via credit or debit cards is increased from ZAR 50 000 to ZAR 100 000 per transaction (to align with trends in e-commerce and digital services);
• the limit for miscellaneous payments to non-residents (such as sponsorships, office and warehouse expenses, demurrage or refunds) is increased from ZAR100 000 to ZAR 200 000 per transaction;
• ZAR 100 000 may be carried in cash when leaving or entering South Africa;
• draft regulations under the Currency and Exchanges Act will be published to include crypto assets within the capital flow management regime;
• restrictions will be eased to enable domestic asset managers to manage their portfolios locally in foreign currency. The reforms will enable the management of portfolios of foreign assets and the trading of foreign currency denominated financial instruments (allowing asset managers to intermediate in global capital flows, particularly in Africa, and attract and manage the foreign savings of South Africans);
• aligning the time lag for residents entering into cross border merchanting transactions to four months (irrespective of the jurisdiction of the foreign payer).

Operational reforms of the South African Reserve Bank include the following:

• allowing Authorised Dealers to renew authorities previously granted by the South African Reserve Bank for local settlement in foreign currency (if there are no material changes in the circumstances under which original approval was granted); and
• enhanced supervisory oversight to ensure anti-money laundering, countering the financing of terrorism, and tax infringements do not occur.   

SARS related developments

Notable developments at SARS include:

• registering 1.3 million new taxpayers across various tax categories (contributing net revenue of ZAR 4.9 billion);
• a continuing compliance focus on participants in the digital economy (particularly social influencers);
• engaging 1500 additional debt collectors (and together with National Treasury implementing monthly reporting on debt collections to enhance transparency and track progress);
• collecting ZAR 79.4 billion of the total outstanding tax debt by 31 January 2026 (out of ZAR 646 billion, ZAR 518.2 billion of which is undisputed); and
• enhancing collaboration with banks and hiring additional legal professionals to pursue civil judgments. 

The CMS tax team can be contacted should you have queries relating to tax and exchange control policy proposals outlined in the 2026 Budget Review.