Legislative Engagements

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SAIT submitted concerns to SARS about potential double taxation arising from trust distributions. The submission outlines how current tax rules—particularly Section 7C of the Income Tax Act and estate duty provisions—can result in both annual donations tax on interest-free loans and estate duty on the same amounts or growth, without offset. SAIT highlights unintended tax consequences of automatic trust distributions and calls for a review to prevent double taxation and ensure fair tax treatment.
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The South African Institute of Taxation (SAIT) has submitted its official comments on the Taxation of Alcoholic Beverages Discussion Paper released by the National Treasury on 13 November 2024.This submission was compiled by the SAIT Customs and Excise Technical Workgroup and aims to provide insightful, practical feedback on the proposed reforms outlined in the Discussion Paper. Our response reflects the views of industry professionals and stakeholders committed to fostering a fair, transparent, and economically sound tax framework for the alcoholic beverage sector.We appreciate the opportunity to engage with the National Treasury on this important matter and trust our comments will be of value in shaping the way forward.

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SAIT submitted commentary to SARS regarding the revised draft amendments to Form DA 5, which concerns the declaration of sealable goods on ships. Initially, SAIT had concerns about the legal alignment of the amendment. However, after reviewing the updated draft (published 6 February 2025), SAIT confirmed that their concerns were addressed and expressed support for the revised form, commending SARS for incorporating their earlier feedback.

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The South African Institute of Taxation (SAIT) provided feedback on the “Carbon Tax Discussion Paper: Phase Two” to the National Treasury, expressing support for maintaining revenue neutrality for electricity prices and incentive-based allowances, while raising concerns about the lack of reference to decreasing emissions in the 9th National GHG Inventory Report, the timing and effectiveness of increased carbon offset allowances, and the removal of the trade exposure allowance for fuel combustion emissions. SAIT also highlighted the significant increase in carbon tax rates, which could hinder investment in decarbonisation, and recommended extending existing incentives and introducing a new “Investment Allowance” for decarbonisation projects.
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The SAIT submission on the Carbon Tax Phase II Discussion Paper supports several proposals, including revenue neutrality in electricity pricing, incentive-based allowances, and continued relief for hard-to-abate sectors. However, it raises concerns about steep carbon tax increases, potential negative impacts on investment, limited availability of carbon offsets, and the removal of trade exposure allowances for fuel combustion. SAIT also critiques the linking of benchmark allowances to mitigation plan approvals and suggests extending existing incentives like Section 12L, introducing a new investment-linked carbon tax allowance, and ensuring the market is ready for offset expansion. The submission calls for a more balanced, gradual approach to ensure policy effectiveness without undermining industrial competitiveness.
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SAIT supports the proposed amendments to Part 1 of Schedule No. 1, which aim to improve tariff classification clarity and efficiency. They note a potential concern for local manufacturers due to a reduced AfCFTA import duty rate but see no major issues overall.
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The SAIT International Tax Technical Work Group highlights a misalignment between current group rollover relief provisions in the Income Tax Act and the economic reality of loop structures, where South African residents hold interests in offshore entities that own local assets. Although intended to facilitate tax-neutral intra-group restructurings, the narrow definition of a “group of companies” under section 41 excludes these structures, leading to unintended tax inefficiencies. The submission proposes amending the legislation to broaden this definition, align with recent exchange control relaxations, and issue clear guidelines to ensure equitable tax treatment and better support corporate reorganisations without eroding the South African tax base.

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The SAIT Customs and Excise Technical Work Group raises concerns over the disconnect between SARS’s recent policy announcements on low-value e-commerce imports and the existing Customs and Excise Act, 1964. While SARS introduced a four-tier system based on World Customs Organization (WCO) guidelines—intended to regulate de minimis shipments and prevent VAT and duty evasion—these categories remain absent from the formal legislation, creating legal uncertainty and enforcement challenges. The group explains how importers exploit loopholes by splitting consignments into smaller shipments to avoid duties. As a remedy, it recommends that the four categories be officially embedded in primary and secondary legislation to improve legal clarity, bolster compliance, align with international standards, and level the playing field for compliant businesses in the fast-growing e-commerce sector.

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The SAIT Corporate Tax Technical Work Group recommends aligning the treatment of local hedge fund collective investment schemes (CIS) with other CIS categories by amending section 9D(2)(D) of the Income Tax Act. The issue arises because the 2024 Taxation Laws Amendment Bill expands the definition of a “company” to include hedge fund CISs but fails to update corresponding provisions that exempt CISs from controlled foreign company (CFC) rules. Without this adjustment, local hedge fund CISs investing in foreign counterparts may be inappropriately classified as CFCs, creating unnecessary administrative burdens. The group proposes synchronizing this amendment with future tax years to facilitate consistent and practical implementation within existing reporting frameworks.

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The SAIT Business Tax Incentives and Grants Technical Workgroup calls for the formal inclusion of several key government grant programmes—namely the Agro Industrial Fund (AIF), Manufacturing Support Program (MSP), Blended Finance Scheme (BFS), and the Automotive Investment Transformation Fund (AITF)—in the Eleventh Schedule of the Income Tax Act. Currently, the exclusion of these programmes from the list of tax-exempt grants limits their potential effectiveness by reducing clarity and discouraging participation. These programmes serve strategic economic goals, including agricultural development, manufacturing support, and transformation of the automotive sector. Incorporating them into the Schedule would ensure consistent tax treatment, encourage broader uptake, and better align with international best practices. The Workgroup urges the Minister of Finance to address the issue through consultation with stakeholders and timely gazetting of exemptions.

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The South African Institute of Taxation (SAIT) submitted comments on SARS’s Draft Interpretation Note regarding the diminution in the value of closing stock. While SAIT found the technical content accurate and well-founded, it proposed minor revisions focused mainly on citation formatting and grammar. These included recommending consistent legal references, such as using full case names only once, and general improvements to the clarity and professionalism of the document. SAIT expressed appreciation for the opportunity to provide input and offered further engagement if needed.
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The SAIT Tax Administration and Dispute Management Technical Work Group’s submission proposes key legislative reforms to improve fairness and efficiency in South Africa’s tax system, including aligning refund mechanisms for withholding taxes on royalties and interest with those for dividends, clarifying that tax assessment withdrawals under section 98 of the Tax Administration Act (TAA) are valid post-prescription, and refining the interpretation of “adequate security” in suspension of payment requests under section 164 to prevent SARS from demanding upfront payments in bona fide disputes. The submission also calls for aligning the objection and payment due dates to avoid prejudicing taxpayers seeking to suspend payment before formally disputing an assessment.

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The SAIT VAT Technical Work Group’s submission proposes several targeted amendments to South Africa’s VAT legislation to address inconsistencies, close loopholes, and improve administrative efficiency—most notably, redefining “insurance” to require payment to prevent unintended VAT deductions, aligning documentation rules for zero-rated supplies, zero-rating airtime vouchers used exclusively outside South Africa, including silver in export provisions currently applicable only to gold, extending export timeframes for sea shipments of precious metals, harmonizing VAT registration rules for non-residents involved in exports, and expanding intermediary VAT rules to cover both local and foreign electronic service suppliers.

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The South African Institute of Taxation (SAIT) submitted comments on the draft DA 5 form, expressing concern that the proposed amendments do not align with existing legislation governing the declaration of sealable goods on board ships. The submission highlights discrepancies between the form and Rules 9.02 and 9.03, particularly in the unequal allocation of goods between the ship’s master and crew, which contradicts the law. SAIT also points out unclear references to excisable goods and the impracticality of certain form elements for crew members. The Institute recommends that the form be revised to ensure full legal compliance, clarity, and practicality in its application.
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The SAIT Wealth and Family Business Tax Technical Work Group’s submission to the South African National Treasury and SARS outlines key tax reform proposals for inclusion in the 2025 Budget Review. The document highlights a critical mismatch between estate duty and capital gains tax (CGT) when assets are transferred to a trust for the benefit of a surviving spouse. While estate duty allows for deferral in such cases, CGT does not, creating financial strain for vulnerable elderly spouses. The submission proposes aligning CGT and donation tax laws with estate duty provisions to extend rollover relief to trusts benefiting spouses, both during marriage and upon death. This alignment would better protect aging individuals from financial exploitation and ensure equitable tax treatment. Additionally, the document addresses the tax treatment of distributions from South African inter-vivos trusts to non-resident beneficiaries, emphasizing the need for clarity and fairness in light of recent legislative changes.

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SAIT’s submission on the draft interpretation note regarding “similar finance charges” under section 24J of the Income Tax Act argues that the current SARS interpretation may not align with the legislative intent or practical application of the provision. SAIT maintains that section 24J is primarily concerned with determining whether a financial instrument exists, and once that is established, all amounts payable under the instrument, including fees such as raising, structuring, and origination fees, should be included in the interest calculation using the yield-to-maturity method. Citing case law (IT 25042) and the 1995 Explanatory Memorandum, SAIT emphasizes that these charges are integral to the cost of borrowing and should not be treated separately. It concludes by recommending that SARS revise the draft to ensure consistency, clarity, and alignment with both legal precedent and the realities of financial transactions.

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In this submission, SAIT expresses concern over the exclusion of hybrid vehicles from the tax incentive proposed under Section 12V for battery electric and hydrogen-powered vehicles, highlighting a contradiction between the National Treasury’s response to the 2024 Draft Tax Bills and commitments made during the President’s address at SA Auto Week. The draft legislation limits incentives to Zero Emission Vehicles (ZEVs), while plug-in hybrid and hybrid vehicles are excluded on the basis that existing support is available through the APDP2 programme. However, the NAAMSA media statement—cited in the submission—indicates that hybrids were expected to be part of the incentive strategy. SAIT argues that all New Energy Vehicles (NEVs), including hybrids, should be included in the Section 12V framework to ensure policy coherence, support South Africa’s decarbonisation goals, and maintain the country’s competitiveness in the global automotive supply chain.

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SAIT raises concerns over SARS’s issuance of “verification” letters for trust income tax returns that request detailed information—such as income and expense breakdowns per fixed property—which in SAIT’s view, extends beyond the legal definition of verification. Citing the Forge Packaging case, SAIT argues that such requests resemble the characteristics of an audit, which involves deeper interrogation of information, third-party corroboration, and assessment of completeness and authenticity. Since the requested information often requires manual analysis and is not readily available from trusts’ typically unsophisticated annual records, the demands are impractical and burdensome. SAIT contends that these letters should be formally classified as audits under Section 42 of the Tax Administration Act, rather than verifications, and requests SARS either revise its classification or provide detailed justification for its current approach.

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The South African Institute of Taxation (SAIT) presented comprehensive feedback on the 2024 Draft Taxation and Administration Laws Amendment Bills, highlighting several key concerns. These included practical challenges with proposed changes to the input VAT prescription period, the unbalanced treatment of currency losses under section 24I, and the risk of double taxation from anti-avoidance trust amendments. SAIT supported changes around public officer appointments but raised concerns about the risks faced by default appointees. The submission questioned allowing non-legal practitioners to represent taxpayers in Tax Court without clear “fit and proper” criteria and advocated for moving the ADR process earlier while ensuring independence. Additional comments addressed insufficient relief for unlisted real estate funds, confusion around retrospective amendments to fuel legislation, and the need for collaboration rather than punishment in ETI reforms. Concerns were also raised over VAT changes affecting B2B services, electronic supplies, and education sector exemptions, with SAIT calling for improved clarity, thresholds, and consultation.

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SAIT’s submission on the draft amendments to Part 1 of Schedule No. 1 welcomes SARS’s initiative to insert Additional Notes and new tariff subheadings to clarify the treatment of herbal and homeopathic medicinal preparations under heading 3004. SAIT views this as a positive step toward resolving long-standing ambiguity in the customs clearance process, which has caused delays due to inconsistent interpretations and lack of awareness about SAHPRA requirements. However, it raises concerns about the duplication of SAHPRA references in the draft and seeks clarification on licensing requirements. Additionally, SAIT stresses the need for coordination between SARS and other government agencies (OGAs) to prevent conflicting information between tariff schedules and the published list of prohibited and restricted goods.
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SAIT’s submission on the draft interpretation note regarding the meaning of a “reserve fund” under section 23(e) of the Income Tax Act questions the inclusion of insurance policies as reserve funds. SAIT argues that insurance premiums represent incurred expenses, not reserve transfers, and notes that such policies—particularly those related to death, disability, or illness—are explicitly disallowed under section 23(r). The submission emphasizes that a reserve fund typically involves a deliberate accounting provision, which is not the case with insurance premiums. SAIT recommends removing the draft’s reference to insurance-related reserve funds, as it misrepresents the accounting and legal nature of such expenditures.
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The South African Institute of Taxation (SAIT), along with members of its mining industry technical workgroup, submitted comments on SARS’s draft guide concerning the Mineral and Petroleum Resources Royalty Act. They noted that while royalty calculations for refined minerals like gold are relatively straightforward, the draft guide lacks sufficient detail to effectively support taxpayers, especially regarding complex scenarios involving unrefined minerals. SAIT emphasized the need for clearer guidance on the treatment of pre-2004 dumps—materials not subject to royalties—particularly when mixed with royalty-bearing materials. They also recommended including examples and a more defined framework for cost allocation in EBIT calculations. SAIT expressed appreciation for the opportunity to contribute and welcomed further engagement.
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SAIT’s submission on the draft interpretation note regarding the meaning of a “reserve fund” under section 23(e) of the Income Tax Act questions the inclusion of insurance policies as reserve funds. SAIT argues that insurance premiums represent incurred expenses, not reserve transfers, and notes that such policies—particularly those related to death, disability, or illness—are explicitly disallowed under section 23(r). The submission emphasizes that a reserve fund typically involves a deliberate accounting provision, which is not the case with insurance premiums. SAIT recommends removing the draft’s reference to insurance-related reserve funds, as it misrepresents the accounting and legal nature of such expenditures.

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The SAIT Environmental Tax Technical Work Group submitted comments on the Draft Taxation Laws Amendment Bill, 2024, focusing on proposed changes to environmental tax provisions under the Carbon Tax Act. The group recommends retaining full calorific value ranges to support accurate emissions reporting, aligning fuel values (e.g., for coal and diesel) with Department of Forestry, Fisheries and Environment (DFFE) guidelines, and including South Africa-specific emission factors. They call for clearer unit specifications in emissions tables, clarification on whether carbon offset capacity thresholds apply per project or entity, and updates to ensure cullet is excluded in glass emission factors. Finally, they urge that the Act explicitly state whether Tier 1, 2, or 3 emissions methodologies may be used and whether these must align with DFFE submissions to avoid confusion currently caused by ambiguous legislative language.
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The SAIT Customs and Excise Technical Work Group submitted comments on the Draft Taxation Administration Laws Amendment Bill, 2024, focusing on the proposed retrospective reclassification of fuel products under tariff heading 27.10. The submission addresses concerns regarding the reclassification of “light oils and preparations” from subheading 2710.11/12 to 2710.19, effective from 1 January 2002, which may require affected traders to retrospectively apply for manufacturing or storage licenses and import permits. SAIT highlights the potential compliance and licensing implications for industry stakeholders, especially given ambiguities around the application of subheading notes related to distillation thresholds. The group requests urgent clarification on how the reclassification should be interpreted and implemented, particularly where products do not meet the 210°C distillation requirement, and whether the broader 362°C threshold in Note 1(g) should guide classification under 2710.19.
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The SAIT International Business Tax Work Group provided feedback on the 2024 Draft Taxation Laws Amendment Bill, supporting clarifications on hyperinflationary currency translation, shareholding periods, foreign tax rebates on capital gains, and CFC income rules. However, they raised concerns about proposed changes to section 24I of the Income Tax Act, particularly the expanded definition of “exchange item” and the ring-fencing of foreign exchange losses. SAIT cautioned that these changes could create inconsistencies, penalize trading companies, and deviate from the original intent of section 24I. They recommended aligning the treatment of hybrid instruments with existing anti-avoidance provisions and suggested that section 20, rather than section 24I, be amended to manage exchange losses for non-trading entities. They also flagged minor drafting errors for correction.
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The SAIT Tax Administration and Dispute Resolution Work Group submitted comprehensive feedback on the 2024 Draft Tax Administration Laws Amendment Bill, addressing key concerns around taxpayer representation in the Tax Court, cost recovery by SARS officials, and expanded powers for SARS in debt recovery. The submission critiques the lack of clarity in defining “fit and proper” representatives, warns of administrative burdens in cost taxation, and raises concerns about the impact of SARS interviews on taxpayer rights. It supports amendments aligned with constitutional rulings on taxpayer confidentiality and suggests clearer dispute resolution procedures, especially regarding ADR and tax board jurisdiction. The group also highlights the need for practical relief for companies in business rescue, particularly regarding tax compliance status, and welcomes clarity on public officer appointments.
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The SAIT VAT Technical Work Group submitted detailed commentary on the 2024 Draft Taxation Laws Amendment Bill, focusing on proposed changes to the VAT Act. Key issues addressed include clarifying VAT treatment for services to non-resident subsidiaries, Islamic finance arrangements, and input tax claim periods. The submission raises concerns about administrative burdens, system limitations, and unintended consequences—particularly for educational institutions and foreign donor-funded projects. It also critiques the proposed broadening of VAT exemptions for educational institutions, warning of financial and compliance impacts, especially for universities. The group recommends practical alternatives, such as phased implementation, clearer definitions, and system adaptations, to ensure fair and efficient VAT administration.
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The SAIT Business Tax Incentives and Grants Technical Work Group submitted comments on the Draft Taxation Laws Amendment Bill, 2024, specifically regarding the proposed section 12V incentive for investments in buildings, machinery, and equipment used in producing electric and hydrogen-powered vehicles. While the group welcomed the incentive’s design and lower qualification threshold, they highlighted that original equipment manufacturers (OEMs) and component manufacturers, who play a key role in the supply chain, may be excluded from the incentive despite needing significant investment to adapt their facilities. SAIT acknowledged the fiscal constraints of extending the 150% tax allowance to component manufacturers, who already benefit from cash grants through the Department of Trade, Industry and Competition, but requested clarity on whether these manufacturers may be included in the future or if additional criteria might apply to determine eligibility.
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The SAIT submission on the Draft Guide to Income Tax Benefits in Special Economic Zones (SEZs) supports the guide’s clarity but identifies key areas requiring correction and clarification. First, SAIT points out that the guide references the outdated name “Department of Trade and Industry (DTI)” instead of the current “Department of Trade, Industry and Competition (DTIC),” and requests this be corrected throughout the document. Second, the guide’s mention of section 12I incentives may mislead readers into thinking new applications are still possible, when in fact the application window closed on 31 March 2020. SAIT recommends a note be added to clarify that only previously approved projects within their compliance periods can still benefit from the section 12I incentive.
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