Staying on top of tax developments is not always easy, especially when changes span personal income tax, VAT, corporate rules, and case law all at once. That is why Johan Kotze, Tax Executive at Shepstone & Wylie Attorneys, compiles this quarterly update. The first quarter of 2025 was a busy one, covering the national Budget, important regulatory notices, five significant court cases, and fresh guidance from SARS through interpretation notes and updated guides. Here is an overview of what you need to know.
The 2025 Budget: What Changed and What Didn’t
The headline announcement from the 2025/26 Budget is a proposed VAT rate increase of 0.5% this year, with a further 0.5% increase planned for 2026/27. To soften the impact on lower-income households, government has proposed zero-rating for additional essential food items. The fuel levy will remain unchanged.
On personal income tax, there is no inflation adjustment to tax brackets or rebates for 2025/26. In practical terms, this is a fiscal drag: as salaries rise with inflation, more income gets pulled into higher tax brackets. The primary rebate stays at R17 235, with the tax-free threshold for those under 65 remaining at R95 750. Medical tax credits are also frozen at R364 per month for the first two members and R246 per month for additional members.
For property buyers, transfer duty thresholds have been adjusted upward by 10%. The zero-rate threshold now applies to properties up to R1 210 000, up from R1 100 000.
The Employment Tax Incentive has been restructured from 1 April 2025. The qualifying income bands have been widened, and the maximum incentive of R1 500 per month now applies to employees earning between R2 500 and R5 500 per month. Employers in sectors relying on minimum wage workers should take note. Separately, the Urban Development Zone incentive has been extended by five years to 31 March 2030, and the temporary renewable energy incentive introduced in 2023 fell away on 28 February 2025.
Technical Proposals Worth Watching
The Budget tabled a wide range of proposed legislative amendments, and while these remain in consultation, they signal where the law is heading.
For individuals, a proposed reinstatement of the income tax exemption for child maintenance payments is significant. Currently, the paying parent receives no deduction while the recipient is taxed. The proposal restores the original policy intent. There are also proposed changes relevant to employees who previously claimed foreign employment income exemptions, and amendments addressing divorce settlements under religious tenets.
For businesses, multiple anti-avoidance measures are being tightened, covering third-party backed shares, hybrid equity instruments, and interest limitation rules. Companies involved in asset-for-share transactions and corporate reorganisations involving collective investment schemes should be aware that several proposals target loopholes in this area.
On the VAT side, numerous refinements are proposed, including changes to going-concern transactions, intermediary provisions, silver exports, and the treatment of temporary residential lettings. The Capitec Bank Constitutional Court decision has also triggered a review of the definition of “insurance” in the VAT Act.
Interest Rates
The interest rate on outstanding taxes decreased during the quarter, from 11.50% as at 1 January 2025 to 11.25% from 1 March 2025. The official rate of interest, relevant for calculating fringe benefits on low or interest-free employer loans, currently sits at 8.75%, linked to the Reserve Bank’s repurchase rate.
Tax Cases: Key Decisions This Quarter
Five important cases were reported this quarter, touching on issues relevant to a wide range of taxpayers.
Enviroserv Waste Management v SARS addressed whether landfill cells used in hazardous waste treatment qualified as manufacturing plant under section 12C (attracting 40% and 20% depreciation) or as waste disposal assets under section 37B (5% per year). The Supreme Court of Appeal found in favour of Enviroserv, confirming the cells were used in a process similar to manufacture. The court also provided useful guidance on the “bona fide inadvertent error” defence and how voluntary disclosure after notification of audit affects understatement penalty rates.
Wiese and others v SARS tackled whether a “tax debt” for purposes of third-party liability under section 183 of the Tax Administration Act needs to be formally assessed before SARS can pursue parties who assisted in dissipating assets. The court held it does not. This is important for advisors and trustees: helping someone move assets beyond SARS’ reach before an assessment is issued will not shield you from liability.
ITC 1979 confirmed the Tax Court’s jurisdiction to hear a matter involving deductions for prescribed customs duties. Once a court has jurisdiction over an income tax appeal, it retains jurisdiction over all ancillary matters, including quantum. Two further cases, ITC 1980 and ITC 1981, addressed complex issues around transfer pricing, cross-border intercompany loans, and the timing of income and expenditure recognition.
Interpretation Notes and Guides
SARS issued several updated interpretation notes this quarter, covering lessors of affected assets, public benefit organisations and sport, government grants, and security expenditure deductions. A draft note on the taxation of missionaries was also released for comment. Two updated tax exemption guides for institutions, boards and public benefit organisations were also published, and are essential reading for any non-profit navigating SARS’ requirements.
Take Action
This quarter’s developments affect almost every category of taxpayer. Whether you are an individual, employer, corporate, trust, or non-profit, the changes discussed above may have a direct bearing on your tax position. We encourage you to download the full update below, work through the sections most relevant to your circumstances, and contact us if you would like to discuss how any of these developments apply to you.