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Following the 2026 Budget Speech delivered by Finance Minister Enoch Godongwana, several new tax proposals have been introduced, most of which will be released for public comment later this year.
On 25 February 2026, the Minister of Finance, Enoch Godongwana, delivered the 2026 budget speech. We have set out below a summary of the key tax proposals included in the budget. It is important to note that the enacting legislation for most of these proposals will only be published for public comment during the course of the year.
Income Tax Act
Limiting donations tax exemption for non-resident spouses
It is proposed that the donations tax exemption for donations between spouses be limited to donations between resident spouses.
Nuclear Rehabilitation Fund
The tax-exempt rehabilitation fund regime currently used for mining operations will be extended to allow nuclear facilities to benefit from tax deductible cash contributions for environmental rehabilitation, and to exempt the growth of the fund from tax.
Interest Limitation Rules
The 2024 proposal to align the formula in the rules limiting interest deductions (section 23N) with section 23M is proposed to be withdrawn, as it is deemed unnecessary given the distinct nature of rules and the transactions to which these sections apply.
Short-Term Insurance
Section 28(3B)(a) will be amended to align the tax treatment on the transfer of insurance liabilities between short term insurers with International Financial Reporting Standard (IFRS) 17.
Currency Translation (CFCs & DTMCs)
Amendments are proposed to ensure that where a Domestic Treasury Management Company (DTMC) is a resident shareholder of a Controlled Foreign Company (CFC), the currency translation rules under section 9D(6) will not apply, due to the application of section 25D(5).
Non-resident Employers
The Fourth Schedule of the Act is to be amended to oblige non-resident employers to only withhold employees' tax where the employee is effectively connected with the employer's permanent establishment in South Africa.
Underestimation Penalty
The timely payment of the estimated amount is now proposed as a requirement, for a provisional taxpayer to fall outside the scope of underestimation penalties on the basis that the estimate falls within the accepted tolerance. Additionally, it is proposed that the threshold cap to safely rely on historical assessments rather than current estimates is increased from R1 million to R1.8 million, effective 1 March 2026.
Value-Added Tax (VAT) Act
VAT Threshold
The compulsory VAT registration threshold has been more than doubled from R1 million to R2.3 million.
SEZ and CCAE Services
It is proposed that services must be physically rendered within a customs controlled area to a Customs Controlled Area Enterprise or a Special Economic Zone Operator to qualify for the zero-rating.
Gold Supply (Section 11(1)(f))
The zero-rating of gold supplied to listed entities is proposed to be repealed due to the extreme complexity of isolating primary unprocessed gold from manufactured secondary gold.
Second-Hand Goods
Notional input tax claims will be restricted to a tax period no later than the tax period in which the supply of the second-hand goods takes place, subject to the 5-year prescription rule, to prevent the fiscus from incurring financial losses during exports.
To combat fraudulent claims, vendor documentation must now align with the 'Second-Hand Goods Act', mandating specific records.
Tax invoices for subsequent supplies of second-hand goods must explicitly reflect the original purchase price paid on acquisition and the amount of notional input tax previously claimed.
Electronic Services
Section 54(2B) is proposed to be amended so that, by default, the intermediary accounts for the VAT on the supply of electronic services unless an agreement states otherwise, easing compliance risks for SARS.
VAT Administration
The structural distinction between eFilers and non-eFilers is proposed to be removed, which means that all VAT vendors must submit returns and payments on the last business day of the month.
Carbon Tax Act
Carbon Fuel Levy
The carbon levy rises by 19c/li and 8c/li for petrol and diesel respectively from 1 April 2026.
Carbon Tax Refunds
It is proposed that refunds be aligned with the five-year carbon budgeting cycle, so that a refund may be claimed in the third year for the first two tax periods and for the remaining tax periods.
Threshold for code 1A4a activities
The capacity based threshold is proposed to be replaced with an emissions threshold of 25000 tonnes of carbon dioxide equivalent, due to the use of back-up diesel generators during electricity supply shortages.
Customs and Excise Act
Temporary Admission Carnets
In relation to temporary exports and imports it is proposed that the Commissioner be enabled to issue rules regarding the use and submission of international carnets.
Rebate Non-compliance
It is proposed that section 75(10) of the Act be redrafted to provide specific criteria for the exercising of the Commissioner's discretion to exempt or condone non-compliance with the rebate requirements.
Fuel Levies Administration
The carbon fuel levy administration is proposed to be separated from the general fuel levy under a new Part 5C of Schedule No. 1.
Electronic Tobacco Products
It is proposed that the unit in terms of which electronic heated tobacco products are taxed be changed from 'per 10 sticks' to 'per kilogram net'.
Men's Cricket World Cup 2027
South Africa will apply standard customs duty rebates and temporary import exemptions to facilitate the hosting of the tournament (e.g., for equipment, pharmaceuticals, and promotional materials).
Tax Administration Act
Refund Screening
SARS and banks are considering the screening of refunds prior to deposits being made in taxpayers' bank accounts, to expedite legitimate refunds.
Voluntary Disclosure
It is proposed to amend the voluntary disclosure system to allow applicants to submit a simultaneous application for the separate remission of interest on the defaults disclosed.
Tax Compliance Status – Remission of Penalties
Section 256 of the Act is proposed to be amended to allow a taxpayer's tax compliance status to reflect as compliant where a taxpayer's obligation to pay tax is suspended pending the outcome of a request for remission of penalties. Furthermore, it is proposed that the suspension period be amended to continue for 10 business days after the SARS' rejection of a suspension of payment request.
Tax Matters under Consideration
Urban Development Zone Incentive
Government is reviewing the urban development zone tax incentive to better support affordable housing near jobs, transport, and services. A stakeholder workshop will take place in 2026, with proposals expected in the 2027 Budget.
Collective Investment Schemes
Treasury will release a response to the 2024 CIS discussion paper. The draft response proposal suggests taxing returns from regular CISs and retail investment hedge funds as capital, while excluding qualified hedge funds (minimum R1 million investors) and developing an alternative tax regime for them.
National Online Gambling Tax
Treasury proposed a 20% tax on gross online gambling revenue in addition to provincial taxes. Public comments closed on 27 February 2026. A workshop and revised draft legislation is expected to follow later in 2026.
This bulletin is authored by the Fasken South Africa Tax Team including Partners Conor McFadden, Johan Coertze, Associate Lenate Joubert, and Candidate Attorney Nathan Paul.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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