This article was contributed by the Bowmans Tax team.
The views expressed are those of the authors and do not necessarily represent Africa Tax Review.
South African 2026 Budget. South Africa’s 2026 National Budget marks a significant policy shift, introducing a blend of taxpayer relief measures and structural reforms aimed at stabilising the economy while encouraging growth and investment.
For the first time in several years, National Treasury has provided full inflationary relief to taxpayers, while also rolling back previously proposed tax increases. At the same time, the Budget signals a continued focus on strengthening compliance, expanding incentives, and refining key areas of the tax system.
In this expert analysis, the Bowmans Tax team unpacks the key highlights and what they mean for businesses, investors, and individuals operating in South Africa.
Overview: Economic Recovery and Fiscal Stability
The 2026 Budget reflects improved fiscal and economic indicators:
- South Africa has exited the FATF grey list
- The country has achieved a credit rating upgrade (first in 16 years)
- Borrowing costs have improved
- Stronger-than-expected tax collections from VAT, corporate income tax, and dividends tax
Government has also withdrawn approximately ZAR 20 billion in proposed tax increases, signalling a more taxpayer-friendly fiscal approach.
South African 2026 Budget: Interest Limitation Rules
Summary of Key Provisions
| Limitation | Application |
|---|---|
| Deduction of interest limited to 30% of ‘adjusted taxable income’ | Section 23M |
| Deduction of interest limited to a formula-based percentage (≈47%) of ‘adjusted taxable income’ | Section 23N |
Key Development
- The proposed amendment to align section 23N with section 23M (introducing a 30% cap) has been withdrawn.
- This preserves flexibility in corporate financing and restructuring transactions.
SEE ALSO: SARS Clarifies Interest Deduction Rules on Preference Share Refinancing
Special Economic Zones (SEZs)
Qualifying companies in SEZs benefit from a 15% corporate tax rate instead of the standard 27%.
Proposed Reform Approach
| Current Rule | Proposed Approach |
|---|---|
| Disqualification if >20% of income or expenditure involves connected parties outside SEZ | Focus on arm’s length pricing rather than rigid thresholds |
This change is expected to support supply chain integration and attract investment.
Taxation of Collective Investment Schemes (CIS)
Proposed Direction
| Area | Proposed Treatment |
|---|---|
| Regular CISs & retail hedge funds | Returns taxed as capital |
| Qualified investor hedge funds | May be excluded from CIS tax regime |
This reform aims to:
- Encourage savings
- Provide certainty
- Support investment growth
National VAT Changes
VAT Registration Thresholds
| Threshold Type | Previous (ZAR) | New (ZAR) |
|---|---|---|
| Compulsory VAT Registration | 1,000,000 | 2,300,000 |
| Voluntary VAT Registration | 50,000 | 120,000 |
These changes take effect from 1 April 2026.
Other VAT Reforms
- Clarification on zero-rating for SEZ services
- Removal of zero-rating for certain gold supplies
- Changes to notional input tax timing
- Unified VAT filing system
Exchange Control and Financial Sector Updates
Key Relaxations
| Area | Change |
|---|---|
| Single discretionary allowance | Increased to ZAR 2,000,000 |
| Foreign loan interest caps | Removed (subject to market rates) |
| Card-based payments | Increased to ZAR 100,000 per transaction |
| Payments to non-residents | Increased to ZAR 200,000 |
| Cash limit for travellers | Increased to ZAR 100,000 |
Additional Developments
- Crypto assets included in exchange control framework
- Expansion of foreign currency management for asset managers
- Enhanced AML and tax compliance monitoring
Cross-Border Taxation (Pillar Two)
South Africa continues implementing global minimum tax rules.
| Metric | Previous Estimate | Revised Estimate |
|---|---|---|
| Expected revenue (2026/27) | ZAR 8 billion | ZAR 2 billion |
Amendments to CFC rules will also simplify currency translation for domestic treasury management companies.
Personal Tax Adjustments
Tax Thresholds
| Age Group | 2025/26 (ZAR) | 2026/27 (ZAR) |
|---|---|---|
| Below 65 | 95,750 | 99,000 |
| Age 65+ | 148,217 | 153,250 |
| Age 75+ | 165,689 | 171,300 |
Medical Tax Credits
| Category | Previous (ZAR/month) | New (ZAR/month) |
|---|---|---|
| First 2 members | 364 | 376 |
| Additional members | 246 | 254 |
Capital Gains and Donations Tax Thresholds
| Provision | Previous (ZAR) | New (ZAR) |
|---|---|---|
| Annual CGT exclusion | 40,000 | 50,000 |
| Exclusion at death | 300,000 | 440,000 |
| Primary residence exclusion | 2,000,000 | 3,000,000 |
| Donations (individuals) | 100,000 | 150,000 |
| Donations (entities) | 10,000 | 20,000 |
Savings and Retirement Enhancements
| Area | Previous (ZAR) | New (ZAR) |
|---|---|---|
| Tax-free investments | 36,000 | 46,000 |
| Retirement contributions deduction | 350,000 | 430,000 |
Employment Tax Benefits
| Benefit | Previous | New |
|---|---|---|
| Bursary ceiling (remuneration) | 600,000 | 900,000 |
| Loan proxy cap (housing) | 250,000 | 360,000 |
| Property value cap | 450,000 | 650,000 |
| Compensation (death in service) | 300,000 | 800,000 |
| Awards for service | 5,000 | 16,000 |
VAT & Compliance Reforms
| Area | Change |
|---|---|
| VAT refunds | Pre- or post-deposit screening allowed |
| Notional input tax | Must be claimed within same tax period |
| Intermediary VAT | Default responsibility shifted to intermediary |
| VAT returns | Unified system for all vendors |
Carbon Tax Adjustments
Rates
| Tax | Previous | New |
|---|---|---|
| Carbon tax per tonne | ZAR 236 | ZAR 308 |
| Petrol levy | 14c/litre | 19c/litre |
| Diesel levy | 17c/litre | 23c/litre |
Conclusion
The 2026 Budget reflects a careful balance between fiscal consolidation and economic relief.
While inflationary relief and expanded thresholds provide welcome support to taxpayers, the Budget also introduces stronger compliance measures and continues to refine South Africa’s tax framework.
For businesses and individuals, the key takeaway is clear: opportunities for relief exist, but careful structuring and compliance remain essential.
Professional guidance will be critical in navigating these changes and optimising tax positions under the evolving regulatory landscape.
