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South Africa
Corporate - Significant developments
Last reviewed - 11 December 2024
The original Budget 2025 (March 2025) proposed to increase the VAT rate by 0.5% to 15.5% with effect from 1 May 2025 and a further 0.5% increase to 16% effective from 1 April 2026. To alleviate the burden of the increased tax on consumers, the basket of zero-rated essential food items was also proposed to be expanded. However, these proposals were subsequently reversed and withdrawn. Accordingly, the VAT rate will remain at 15% from 1 May 2025.
The first phase of the carbon tax was extended by three years for the period 1 January 2023 to 31 December 2025. Budget 2025 proposed to extend the electricity price neutrality, increase the carbon offset allowance by 5% and maintain the other key allowances for now.
The Global Minimum Tax Act for the implementation by South Africa of the Pillar Two legislation was promulgated on 24 December 2024. The Act introduces two measures to effect the Pillar Two proposals, namely an Income Inclusion Rule (IIR) and a Domestic Minimum Top-Up Tax for Qualifying Multinationals for years of assessment commencing on or after 1 January 2024. The related Global Minimum Tax Administration Act, which outlines the requirements and procedures for submitting GloBE information returns, refunds, penalties and interest, etc. was promulgated on 9 January 2025.
To encourage the production of electric vehicles in South Africa, the 2024 Taxation Laws Amendment Act (promulgated on 24 December 2024) provides for a deduction (150% of cost) by a motor vehicle manufacturer for qualifying assets brought into use from 1 March 2026 and before 1 March 2036 on production capacity for fully electric and hydrogenâpowered vehicles in South Africa.
In October 2024, the Protocol amending the South Africa-Kuwait Double Taxation Agreement (Kuwait DTA) entered into force. The Protocol amends a number of the Kuwait DTA articles, notably the source country is now afforded the right to tax dividends (up to a maximum rate). Prior to the Protocol, the Kuwait DTA enabled the allocation of sole taxing rights on dividends under the South Africa-Netherlands and South Africa-Sweden DTAs to the residence country as a result of most favoured nation (MFN) provisions in those DTAs. Due to the Protocol amendments, the MFN provisions are no longer triggered and the source country will have taxing rights on the dividends as provided for in the respective DTAs.
The government is conducting a comprehensive review of all corporate tax incentives, with a view to further broaden the CIT base and to avoid complicated tax incentives that reduce progressivity by unfairly advantaging specific sectors or groups of taxpayers and that hamper efficient administration of the tax system.
