Staying on top of tax developments is not always easy, especially when changes span draft legislation, VAT rules, and evolving SARS guidance. That is why Johan Kotze, Tax Executive at Shepstone & Wylie Attorneys, compiles this quarterly update. The third quarter of 2025 was heavily focused on proposed legislative changes, with draft tax bills and regulations setting the direction for the year ahead. Here is what you need to know.
Draft Tax Bills: What’s Coming Next
The standout development this quarter is the publication of the 2025 Draft Taxation Laws Amendment Bill (TLAB) and Draft Tax Administration Laws Amendment Bill (TALAB) for public comment.
These draft bills provide a clear indication of where tax policy is heading, even though the proposals are not yet final.
Key proposals include:
- Ring-fencing of assessed losses: Government plans to lower the income threshold so more taxpayers fall within the rules. This targets individuals using “suspect trades” to reduce taxable income.
- Foreign retirement benefits: The current exemption may be removed, meaning South African residents could be taxed on foreign retirement income under the residence-based system.
- Hybrid equity instruments: Instruments treated as debt under accounting standards (IFRS) will also be treated as debt for tax purposes, tightening anti-avoidance rules.
- Collective investment schemes (CIS): Proposed changes aim to close loopholes where capital gains can effectively escape taxation through CIS structures.
- Low-value imports: The VAT exemption on low-value imported goods is expected to be removed, bringing more imports into the VAT net.
These proposals reflect a broader theme: closing loopholes, aligning tax with economic substance, and protecting the tax base.
VAT and Regulatory Developments
Several draft VAT-related regulations were released alongside the tax bills.
Domestic reverse charge (valuable metals): Proposed amendments aim to resolve practical issues in distinguishing mining residue from other gold-bearing materials, improving enforcement and reducing abuse.
Export regulations: Changes are proposed to broaden the definition of qualifying export locations, ensuring zero-rating can apply more consistently in practice.
VAT modernisation: SARS continues to push forward with system improvements aimed at reducing the VAT gap, improving compliance, and streamlining administration.
Low-value imports: As noted above, removing the VAT exemption will have a practical impact on e-commerce and cross-border purchases.
Technical Proposals Worth Watching
Beyond the headline items, the draft explanatory memorandum contains a wide range of technical amendments that may affect both individuals and businesses.
For individuals:
- Child maintenance payments are proposed to become tax-exempt again when funded from after-tax income.
- Remuneration proxy rules will be tightened to prevent distortions caused by previously exempt foreign income.
- Retirement fund death benefits may receive more consistent and favourable tax treatment across all components.
For businesses:
- Interest limitation rules are being refined to reduce complexity and improve clarity, particularly around group financing and foreign exchange treatment.
- Third-party backed share rules are being strengthened to prevent avoidance through temporary waivers of enforcement rights.
- Dividend tax alignment for financial institutions aims to match tax outcomes with accounting treatment under IFRS.
- Corporate reorganisation rules, especially involving listed shares and CIS structures, are being tightened to ensure the original policy intent is applied.
A consistent theme across these proposals is the move toward substance over form, particularly where financial instruments and group structures are involved.
Tax Cases: Key Decisions This Quarter
Three notable cases were reported this quarter.
C:SARS v Candice-Jean Poulter and Citibank NA v SARS both deal with important procedural and substantive tax issues, particularly around SARS’ powers and the interpretation of financial arrangements.
ITC 1984 provides further insight into how the Tax Court approaches technical disputes, reinforcing the importance of correct treatment and proper documentation.
While fewer cases were reported than in Q2, the decisions continue to highlight SARS’ focus on enforcement and accurate application of tax law.
Interpretation Notes and Guides
SARS issued several updated interpretation notes during the quarter, covering areas such as assessed losses, taxation of missionaries, skills development levy exemptions for public benefit organisations, and capital gains tax for non-profits.
Additional guidance addressed deductions for improvements to property not owned by the taxpayer, along with draft updates on tax exemptions for bodies corporate and similar entities.
Updated guides on urban development zones and recreational clubs were also released, which are particularly relevant for property structures and non-profit organisations.
Take Action
This quarter is less about immediate changes and more about what’s coming next. The draft tax bills signal meaningful shifts in how income, structures, and transactions will be taxed going forward.
If you are operating across borders, using trusts or investment structures, involved in corporate reorganisations, or relying on specific tax exemptions, now is the time to review your position and prepare for potential changes.
Download the full update below for a detailed breakdown of all developments this quarter, and get in touch if you would like to discuss how these changes apply to your circumstances.