South Africa’s Taxation Laws Amendment Act 2026 abolishes VAT exemption on low-value imports and introduces broad tax changes across income tax, VAT and carbon tax regimes.
South Africa’s President has enacted the Taxation Laws Amendment Act 2026 (the Act), which abolishes the VAT exemption previously applicable to low-value imported goods.
The Taxation Laws Amendment Act, 2026 (Act No. 5 of 2026) was assented to on 31 March 2026, and published on 1 April 2026. It introduces broad amendments to several South African tax statutes, including the Income Tax Act, 1962, the VAT Act, 1991, and the Carbon Tax Act, 2019.
Below summary of the changes:
Income Tax Act Amendments
Retirement and savings (“two-pot” system)
The Act refines the “two-pot” retirement system, including clearer rules for determining the vested component in pension, provident, and retirement annuity funds. It confirms a minimum savings withdrawal of ZAR 2,000, while allowing full withdrawal upon termination of membership, even where the balance is below ZAR 2,000.
Non-resident withdrawals
The requirement for a continuous three-year non-residency period for certain withdrawals from pension and provident preservation funds is adjusted, with exemptions introduced for specific transfers and withdrawals.
Interest limitation rules (Section 23M)
Stricter rules are introduced for interest deductions on debts owed to specified persons, including revised formulas and updated provisions for carrying forward excess interest.
Controlled Foreign Companies (CFCs)
The high-tax exemption threshold remains at 67.5% of South African normal tax, but taxable income must now include amounts arising under Section 9H(3)(b), with tax refunds also factored into calculations.
Tax incentive extensions
- Energy Efficiency Savings deduction (Section 12L): extended to years of assessment ending before 1 January 2031
- Urban Development Zone incentive (Section 13quat): extended to buildings brought into use by 31 March 2030
Foreign exchange rules (Section 24I) Definitions of “exchange item” and “realised” are expanded to include preference shares, with adjustments to align reporting treatment with IFRS.
Value-Added Tax (VAT) Amendments
Education exemptions
VAT exemptions are clarified and expanded to include public and private colleges registered under the Continuing Education and Training Act, 2006. Goods and services incidental to education, including board and lodging, remain exempt where included in tuition or boarding fees.
Insurance definitions
New definitions of “insurance” and “premium” clarify that a premium must be paid (including subsidised payments) for an arrangement to qualify as insurance.
International services (testing services)
Testing services supplied to non-residents (not VAT vendors) are zero-rated, provided the property tested is either consumable during testing or exported after completion.
National housing programmes
Supplies funded under the Housing Subsidy Scheme are deemed to be services supplied to public authorities or municipalities.
Carbon Tax Act Amendments
Carbon budgets
The definition of “carbon budget” is aligned with the Climate Change Act, 2024, treating it as an allocated amount of greenhouse gas emissions.
Excess emissions charge
A new charge of ZAR 640 per tCO₂e applies to emissions exceeding an approved carbon budget.
Refund mechanism (Section 17A)
A refund system is introduced for carbon tax paid on excess emissions if cumulative emissions over a defined carbon-budget period are later verified to be within the allocated budget.
Offset allowances (Schedule 2)
Offset limits are increased:
- Fuel combustion activities: 10% → 15%
- Mineral and chemical industries: 5% → 10%
Other Notable Changes
Securities Transfer Tax (STT)
An exemption is introduced for securities transferred into collective investment schemes in exchange for participatory interests.
Collective investment Schemes (CIS)
Distributions (excluding gross income) from CIS portfolios are now treated as capital gains for the holder in the year of accrual.
Global minimum tax
The Global Minimum Tax Act, 2024 is updated to incorporate the OECD June 2024 Administrative Guidance on the Pillar Two model rules.
