South Africa

Corporate - Significant developments

Last reviewed - 30 June 2020
  • From 1 April 2018, the value-added tax (VAT) rate increased from 14% to 15% (the VAT rate was last increased in the early 1990s).
  • From 1 April 2019, the list of zero-rated items in Schedule 3 of the Value-Added Tax Act included white bread flour, cake flour, and sanitary pads.
  • From 1 April 2019, regulations prescribing foreign electronic services subject to VAT were broadened significantly.
  • The Carbon Tax Act, 2019 (Act No. 15 of 2019) was enacted on 23 May 2019, bringing the carbon tax into effect from 1 June 2019.
  • Effective from 5 June 2019, a carbon tax levy of 9 cents per litre and 10 cents per litre was introduced to petrol and diesel, respectively.
  • The employment tax incentive was extended in 2018 for another ten years.
  • A national gambling tax in the form of a 1% levy is proposed to be introduced.
  • It is proposed that, with effect from 1 January 2021, the transfer pricing rules will apply to transactions between 'associated enterprises' as contemplated in Article 9 of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention. Guidance on the interpretation and application of the term 'associated enterprise' in the context of South Africa's transfer pricing is expected to be issued by the South African Revenue Service (SARS) during the course of 2020.
  • In the February 2020 Budget, it was announced that limitations would be imposed on the total amount of interest that may be deducted by multinationals operating in South Africa. A discussion paper titled "Tax Treatment of Excessive Debt Financing, Interest Deductions and Other Financial Payments" was released for public comment. Broadly, it is proposed that net interest expense deductions will be restricted to 30% of earnings (i.e. tax EBITDA). The original proposal was that the relevant measures would be introduced for years of assessment commencing on or after 1 January 2021. This date has, however, been moved out to at least 1 January 2022.
  • It was also announced, in the February 2020 Budget, that (with effect from tax years commencing on or after 1 January 2021) tax losses carried forward may only be applied against 80% of taxable income. As is the case with the proposed effective date for the interest limitation rules, this date has been moved out to at least 1 January 2022.