South Africa

The most significant recent changes impacting the taxation of individuals in South Africa are as follows:

• The original Budget 2025 (March 2025) proposed to increase the value-added tax (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 However, these proposals were subsequently reversed and withdrawn.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 remains at 15%.
• From 1 March 2024, to the extent that a non-resident beneficiary has or obtains a vested right to the income received by / accrued to a South African resident trust, the trust will be treated as fiscally opaque, i.e. the trust (instead of the non-resident beneficiary) will be taxed on the income.
• The introduction of a two pot retirement system, announced in 2023, took effect from 1 September 2024. 

• The Budget 2025 proposed to remove the exemption that allows South African tax residents to exclude certain foreign retirement benefits, such as lump sums and pensions, from local taxation when earned for past employment abroad. Draft legislation was issued to give effect to this proposal, but was subsequently withdrawn. The National Treasury has indicated that the matter would be revisited.

• Assessed losses that are realised by an individual who falls into the highest tax bracket (45%) and that results from so-called ”secondary trades” (which includes the rental of property) are ring-fenced in certain instances. It is proposed to reduce the ring-fencing threshold from the top marginal rate of 45% to the rate of 39%. The proposed amendment is expected to take effect on 1 March 2026 for years of assessment starting on or after this date.