Richan Schwellnus | Senior Tax Attorney | Tax Consulting SA | mail me |
The National Treasury’s long-awaited 2026 tax amendment Acts have now been promulgated. These 2026 Tax Amendments introduce a focused set of changes to South Africa’s Value Added Tax (VAT) and Income Tax frameworks. As a result, these amendments carry immediate practical consequences for taxpayers, employers and investors.
The theme is clear. The treasury offers targeted relief through threshold adjustments. At the same time, it refines core income tax provisions through the 2026 Tax Amendments.
Treasury pulls back the VAT increase
Perhaps the most headline-grabbing development is what the treasury has chosen not to do. For example, the Rates and Monetary Amounts and Amendment of Revenue Laws Act, No. 3 of 2026, prevents the contentious VAT rate increase.
Finance Minister Enoch Godongwana had previously announced this increase in the initial 2025 budget speech. This reversal is central to the 2026 Tax Amendments. This is more than a technical amendment.
For consumers, it avoids higher consumption costs. Meanwhile, VAT vendors avoid significant compliance burdens that typically accompany a rate change. At a time of persistent cost pressure, the National Treasury’s decision removes a potential broad-based tax increase on household spending.
Technical changes with direct taxpayer impact
On the income tax side, the amendments are more technical. However, they remain equally important within the 2026 Tax Amendments framework.
The Taxation Laws Amendment Act, No. 5 of 2026, introduces several precise changes to income tax provisions. These include amendments to retirement fund rules, cross-border taxation and specific anti-avoidance provisions.
One practical amendment relates to the two-pot retirement system. The National Treasury has refined the definitions of pension, provident, preservation and retirement annuity funds. In particular, it has clarified the wording for vested and savings component withdrawal rules under the 2026 Tax Amendments.
For example, upon termination of membership, a taxpayer may withdraw the full savings component balance. This applies even where the balance is below R2,000. Previously, the minimum withdrawal threshold would have blocked this.
This is a narrow amendment. However, it has direct practical relevance for retirement fund administrators and members exiting funds.
Incentives and allowances extended
A further important change involves the section 13quat urban development zone allowance. The treasury has extended the sunset date from 31 March 2025 to 31 March 2030 as part of the 2026 Tax Amendments.
For developers and investors in qualifying urban renewal projects, this extension is significant. It preserves accelerated tax deductions for qualifying improvements and developments. Moreover, it does so for an additional five years.
Cross-border and corporate tax precision
The treasury has also tightened rules for controlled foreign companies (CFCs). Specifically, amendments to section 9D of the Income Tax Act, No. 58 of 1962, refine the ‘high-tax exemption’ test. These refinements address threshold comparisons and the treatment of foreign tax refunds paid to shareholders under the 2026 Tax Amendments.
For multinational groups, this is not merely drafting a clean-up. Instead, it may materially affect whether foreign profits are imputed into South African taxable income. This occurs through tighter calculation methodologies for the exemption test.
Employment and threshold relief
The treasury has also introduced more visible tax relief through threshold increases. For instance, it has increased the Employment Tax Incentive thresholds. The qualifying remuneration limit rises from R6,500 to R7,500. At the same time, the lower threshold increases from R2,000 to R2,500. These changes form part of the broader 2026 Tax Amendments.
This adjustment should provide payroll relief for employers. In addition, it further incentivises youth employment.
Likewise, the transfer duty zero-rate threshold has increased from R1.1 million to R1.21 million. All upper bands have increased accordingly. For property purchasers, this is one of the most tangible amendments in the package.
The practical takeaway
The treasury’s 2026 amendments are not dramatic. However, they are deliberate. The VAT rate remains stable, key incentives have been extended and thresholds have increased. At the same time, several technical income tax provisions have been sharpened through the 2026 Tax Amendments.
The real risk for taxpayers lies in underestimating “technical” amendments. In practice, these changes can materially affect tax outcomes, compliance systems and planning positions. Therefore, the safest path forward remains simple. Revisit your tax positions now, before the South African Revenue Service (SARS) does it for you.
