Big businesses in South Africa face having to pay a ‘top up’ tax to the South African Revenue Service (SARS) thanks to a new global minimum tax legislation signed by President Cyril Ramaphosa.<\/p>\n\n\n\n
The president signed the Global Minimum Tax Act and Global Minimum Tax Administration Act into law in 2024.<\/p>\n\n\n\n
The legislation gives effect to the OECD Global Anti-Base Erosion (GloBE) rules designed to protect countries from possible tax losses due to multinational enterprises operating in low-tax (or ‘tax haven’) jurisdiction.<\/p>\n\n\n\n
According to Jordan Mulindi, a tax attorney at Latita Africa, around 40 major South African companies likely qualify for this tax.<\/p>\n\n\n\n
“These companies will have to make up the difference between their effective company income tax in low-tax regions and the 15% target, resulting in a Top-up Tax payable to SARS<\/strong>,” he said.<\/p>\n\n\n\n According to the latest tax statistics published by SARS at the end of 2024, corporate taxes amounted to R317 billion in the 2022 tax year\u2014approximately 18% of total revenues.<\/p>\n\n\n\n While SARS anticipated about 1.1 million companies to submit returns for the year, it is evident that most of the earnings are concentrated at the top.<\/p>\n\n\n\n The taxman noted that only 549 large companies (0.2% of the companies with positive taxable income) had taxable income of more than R200 million and were liable for 66.5% of the corporate tax assessed.<\/p>\n\n\n\n Therefore, the resultant contribution to South Africa’s GDP and SARS revenue from top multinationals who fall under the new laws could be significant, Mulindi added.<\/p>\n\n\n\n However, the expert noted that the OECD GloBE rules, which are often referenced in the new legislation, are remarkably complex, with sophisticated conditions. <\/p>\n\n\n\n “To apply them correctly and beneficially, multinationals will have to carefully review their corporate and tax structures and adapt accordingly,” he said.<\/p>\n\n\n\n Companies will have to submit a so-called ‘GloBE Information Return’ (GIR) that must be submitted to SARS by each entity belonging to the group, both locally and abroad. <\/p>\n\n\n\n Similarly, the entities belonging to foreign multinationals operating in South Africa must submit a GIR for their own tax authority.<\/p>\n\n\n\n How these submissions should be made varies, from all entities nominating either a local or foreign entity to submit a consolidated return on their behalf to some not having to make submission at all due to this function being performed in another jurisdiction that has an agreement with South Africa.<\/p>\n\n\n\n \u201cHowever, they do it, communicating complete and correct information to key entities will be vital,\u201d Mulindi said.<\/p>\n\n\n\n Because the new legislation is backdated to 1 January 2024, concern have been raised that there will not be enough time to implement the systemic changes needed. <\/p>\n\n\n\n However, Mulindi noted that the Acts and the GloBE rules specify a “transition year” to accommodate the switch over.<\/p>\n\n\n\n “Companies will normally be required to submit their GIR 15 months after their year-end. Initially, though, companies whose financial year starts between 1 January 2024 and 1 January 2025 will have 18 months after their year-end to make their submission,” he said.<\/p>\n\n\n\n \u201cSo, for example, a company whose financial year begins on 1 March 2024 will only have to submit a GloBE Information Return 18 months after its year-end on 28 February 2025.”<\/p>\n\n\n\n Again, there are exceptions and exclusions to this rule that MNEs must make themselves aware of.<\/p>\n\n\n\n For the businesses that fail to follow the new laws, penalties await.<\/p>\n\n\n\n Mulindi noted that the penalties for non-compliance are “not significant” compared to the typical revenues these companies earn.<\/p>\n\n\n\n There is a base administrative penalty up to R50,000, doubled to R100,000 if the Top-up Tax exceeds R5 million, and tripled to R150,000 if it exceeds R10 million.<\/p>\n\n\n\n \u201cHowever, the new Acts are applied on top of – not instead of – the existing Tax Administration Act, in which case penalties and interest on late Top-up Tax can become substantial,\u201d he warned.<\/p>\n","protected":false},"excerpt":{"rendered":" Big businesses in South Africa may find themselves having to pay a new ‘top-up’ tax to SARS, thanks to laws signed in 2024.<\/p>\n","protected":false},"author":10,"featured_media":669119,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[21485,19798,86,3246],"class_list":["post-807828","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-jordan-lulindi","tag-latita-africa","tag-oecd","tag-sars"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=807828"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807828\/revisions"}],"predecessor-version":[{"id":807833,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807828\/revisions\/807833"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/669119"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=807828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=807828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=807828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Transition period<\/h2>\n\n\n\n