National Treasury’s long-awaited 2026 tax amendment Acts were promulgated, which introduce a focused set of changes to South Africa’s Valued Added Tax (“VAT”) and Income Tax frameworks. These new amendments have immediate practical consequences for taxpayers, employers, and investors.
Richan Schwellnus
Senior Tax Attorney
The theme is clear: targeted relief through threshold adjustments, coupled with technical refinement of core income tax provisions.
VAT: Treasury Pulls Back the VAT Increase
Perhaps the most headline-grabbing development is what Treasury has chosen not to do. For example, the Rates and Monetary Amounts and Amendment of Revenue Laws Act, No. 3 of 2026 expressly provides for the prevention of the contentious increase in the VAT rate previously announced by Finance Minister Enoch Godongwana in his initial 2025 budget speech.
This is more than a technical amendment. For consumers, it means avoiding higher consumption costs, whilst VAT vendors are able to avoid significant compliance burdens that typically accompany a rate change.
At a time of persistent cost pressure, National Treasury’s decision effectively removes what could have been a broad-based tax increase on household spending.
Income Tax: Technical Changes with Direct Taxpayer Impact
On the income tax side, the amendments are more technical, but no less important.
The Taxation Laws Amendment Act, No. 5 of 2026 introduces several precise amendments to the certain income tax provisions, such as changes to retirement fund rules, cross-border taxation, and specific anti-avoidance provisions.
One of the more practical amendments relates to the two-pot retirement system. National Treasury has refined the definitions of pension, provident, preservation, and retirement annuity funds, particularly the wording dealing with the vested component and savings component withdrawal rules.
For example, upon termination of membership, a taxpayer may withdraw the full balance of the savings component even where the balance is below R2,000, rather than being blocked by the minimum withdrawal threshold previously imposed.
This is a narrow amendment, but one with direct practical relevance for retirement fund administrators and members exiting retirement funds.
A further important change is the extension of the section 13quat urban development zone allowance sunset date from 31 March 2025 to 31 March 2030.
For developers and investors in qualifying urban renewal projects, this is significant. It effectively preserves accelerated tax deductions for qualifying improvements and developments for a further five years.
Cross-Border and Corporate Tax Precision
Treasury has also tightened the rules around controlled foreign companies (“CFC”s). Amendments to section 9D of the Income Tax Act, No. 58 of 1962 specifically refine the so-called ‘high-tax exemption’ test, including the threshold comparison and the treatment of foreign tax refunds paid to shareholders.
For multinational groups, this is not merely drafting clean-up. It may materially affect whether foreign profits are imputed into South African taxable income by tightening the calculation methodology for the high-tax exemption test.
Employment and Threshold Relief
Treasury has also delivered more visible tax relief through certain threshold increases. The Employment Tax Incentive thresholds have also been increased, with the qualifying remuneration limit rising from R6,500 to R7,500, with the lower remuneration threshold moving from R2,000 to R2,500. This should provide welcome payroll relief for employers and further incentivise youth employment.
Likewise, the transfer duty zero-rate threshold has increased from R1.1 million to R1.21 million, with all upper bands correspondingly increased. For property purchasers, this is one of the most immediately tangible tax amendments in the package.
The Practical Takeaway
Treasury’s 2026 amendments are not dramatic, but they are deliberate. The VAT rate remains stable, key incentives have been extended, thresholds have been adjusted upward, and several technical income tax provisions have been sharpened.
The danger for taxpayers lies in underestimating ‘technical’ amendments. In practice, these changes can materially affect tax outcomes, compliance systems, and planning positions.
The safest path forward remains simple: revisit tax positions now, before SARS does it for you.
