This initiative aims to tackle tax avoidance and discourage profit shifting to low-tax jurisdictions, marking a significant step towards greater tax compliance.  

The legislation, first introduced in February last year, was signed into law on December 24. Independent Tax Expert Deborah Tickle described it as a pivotal development.

The Act ensures that multinational companies pay the difference between the taxes they currently pay and the 15% minimum rate to the South African Revenue Service (SARS) rather than foreign jurisdictions. “For companies headquartered in South Africa, taxes will potentially be paid here. This is to prevent revenues from being taxed at lower rates elsewhere,” Tickle explained.  

She noted that the law includes provisions such as the “income inclusion rule,” targeting ultimate parent entities, and a “domestic minimum top-up tax” to ensure SA retains its share of taxes. Exemptions, such as substance-based carveouts, exist to account for legitimate operational activities.  

The new tax policy primarily addresses the digital economy, where profits are often shifted to tax havens through intellectual property. “This tax is aimed at mobile income, income from intellectual property placed in low-tax jurisdictions, while the actual operations are elsewhere,” Tickle said.  

While some fear the legislation may deter foreign investment, Tickle suggested that tax is not the primary consideration for companies setting up operations. “Factors such as ease of doing business, labour skills, and bureaucracy are often more important than tax rates. SA must ensure it remains investor-friendly,” she added.  

Globally, the 15% rate is considered relatively low compared to SA’s corporate tax rate of 27%. “Even with the global minimum tax, some companies may still prefer paying 15% if they can structure their operations efficiently. However, other international initiatives are also curbing tax avoidance, ensuring companies pay taxes where real activities occur,” Tickle concluded.  

--ChannelAfrica--