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Corporate - Significant developments
Last reviewed - 30 June 2022
The corporate income tax (CIT) rate will be reduced to 27% (from 28%) for tax years ending on or after 31 March 2023.
The base broadening measures related to the restructure of the CIT system proposed a limitation on the use of assessed losses and on interest deductions. The following measures will take effect for tax years ending on or after 31 March 2023:
The scope of the current interest limitation rules will be expanded to include payments that are economically equivalent to interest, and the fixed-ratio limitation for net interest expense will be limited to 30% of earnings (i.e. tax EBITDA). The limitation will apply to interest on debt with persons in a controlling relationship where the interest is not subject to tax in the hands of the recipient.
Tax losses carried forward may only be applied against 80% of taxable income, subject to a 1 million South African rand (ZAR) de minimis provision.
South Africa is one of the members of the Steering Group of the Inclusive Framework on BEPS and the February 2022 National Budget announced that South Africa will propose legislative amendments to implement the two-pillar rules once the framework has been finalised and translated into a local context.
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 by the revenue authority. In the February 2022 Budget, the following was announced:
The research and development (R&D) tax incentive is extended in its current form until 31 December 2023.
Tax incentives that will not be renewed when they reach their sunset dates are as follows:
Section 12DA (rolling stock) on 28 February 2022.
Section 12F (airport and port assets) on 28 February 2022.
Section 12O (films), which lapsed on 31 December 2021.
Section 13sept (sale of low‐cost residential units through an interest free loan) on 28 February 2022.
The first phase of the carbon tax will be extended by three years for the period 1 January 2023 to 31 December 2025.
The tax regime for the upstream petroleum industry is being reviewed.