South Africa unveils 2025 budget: Raises VAT and corporate income tax

13 March, 2025

South Africa’s Finance Minister, Enoch Godongwana, presented the 2025 Budget Speech on 12 March 2025. The minister has proposed raising the VAT rate and corporate and personal income taxes. However, no changes to personal income tax rebates or brackets have been proposed.

The key tax changes, as mentioned in the Budget Tax Guide, are as follows:

Corporate income tax: Companies

Income tax for companies apply to years of assessment ending between 1 April 2025 and 31 March 2026, with a tax rate of 27% of taxable income for companies.

Corporate income tax: Small business corporations

Applicable for years of assessment ending between 1 April 2025 and 31 March 2026.

Income tax rates structure:

For taxable income up to ZAR 95,750, the tax rate is 0%;
For taxable income between ZAR 95,751 and ZAR 365,000, a 7% tax applies to the portion exceeding ZAR 95,750;
For taxable income between ZAR 365,001 and ZAR 550,000, the tax is ZAR 18,848 and an additional 21% of the amount exceeding ZAR 365,000;
For taxable income above ZAR 550,000, the tax is ZAR 57,698 and an additional 27% of the amount exceeding ZAR 550,000.

Corporate income tax: Micro businesses

Applicable for years of assessment ending between 1 March 2025 and 28 February 2026.

For taxable turnover up to ZAR 335,000, the tax rate is 0%;
For turnover between ZAR 335,001 and ZAR 500,000, the tax is 1% of the amount exceeding ZAR 335,000;
For turnover between ZAR 500,001 and ZAR 750,000, the tax is ZAR 1, 650 and an additional 2% of the amount exceeding ZAR 500,000;
For turnover above ZAR 750,000, the tax is ZAR 6,650 and an additional 3% of the amount exceeding ZAR 750,000.

Value-added tax (VAT)

VAT is levied at the standard rate of 15% on the supply of goods and services by registered vendors. The rate increases to 15.5% from 1 May 2025 to 16% from 1 April 2026.

A vendor that makes taxable supplies of more than ZAR 1 million per annum must register for VAT. A vendor that makes taxable supplies of more than ZAR 50,000 but not more than ZAR 1 million per annum may apply for voluntary registration.

The VAT zero-rated food list will expand to include certain meats, offal, dairy blends, and canned vegetables.

Excise duty

Excise duties will rise by 6.75% on alcoholic drinks, cigars, and pipe tobacco and by 4.75% on cigarettes and other tobacco products.

Estate duty

Estate duty is levied on the property of residents and the South African property of non-residents, less allowable deductions. The duty is imposed on the dutiable value of an estate, at a rate of 20%, on the first ZAR 30 million and at a rate of 25% above ZAR 30 million.

Donations tax

Donations tax is levied at a flat rate of 20% on the cumulative value of property donated since 1 March 2018, not exceeding ZAR 30 million, and at a rate of 25% on the cumulative value of property donated since 1 March 2018, exceeding ZAR 30 million.

Dividends tax

Dividends tax is a final tax at a rate of 20% on dividends paid by resident and non-resident companies on shares listed on the Johannesburg Stock Exchange or other South African-licensed exchanges. Dividends are tax-exempt if the beneficial owner of the dividend is a South African company, retirement fund, or other exempt person. Nonresident beneficial owners of dividends may benefit from reduced tax rates in limited circumstances.

Taxation of capital gains

Capital gains from asset disposal are taxed as part of taxable income, with maximum rates of 18% for individuals and special trusts, 21.6% for companies, and 36% for other trusts.