2024 Budget: South Africa to Implement Global Minimum Corporate Tax
South Africa has proposed to implement global minimum tax rules with retroactive effect from 1 January 2024. This was announced by the Minister of Finance during his 2024 Budget Speech delivered on 21 February 2024. The government expects the implementation of this reform to yield an additional ZAR 8 billion in corporate tax revenue in 2026/27.
In line with this announcement, the National Treasury released the draft Global Minimum Tax Bill and the draft Global Minimum Tax Administration Bill for public comment. The draft Global Minimum Tax Bill is aimed at implementing the GloBE Model Rules in South Africa, imposing a top-up tax at a rate of 15% on the profits of in-scope multinational enterprise (MNE) groups (i.e. those with annual revenue exceeding EUR 750 million). The legislation proposes to introduce two measures to effect the change, namely an income inclusion rule (IIR) and a domestic minimum top-up tax (QDMTT). Meanwhile, the draft Global Minimum Tax Administration Bill focuses on the operational aspects and enforcement mechanisms of the proposed legislation.
The draft Global Minimum Tax Bill encompasses various provisions, most notable of which are the IIR which will enable the application of a top-up tax on profits reported by qualifying South African MNEs operating in other countries with effective tax rates under 15%, and the QDMTT which will enable SARS to collect a top-up tax for qualifying MNEs paying an effective tax rate of less than 15% in South Africa. Other provisions include but are not limited to:
- charge to tax for constituent entities;
- inapplicable articles of the GloBE Model Rules;
- charge to tax for domestic constituent entities;
- charge to tax for domestic joint ventures;
- calculation of the QDMTT;
- computation of adjusted covered taxes;
- computation of top-up tax;
- transitional rules; and
- imposition of and liability for top-up tax.
On the administrative side, the draft Global Minimum Tax Administration Bill addresses the:
- obligation to submit GloBE Information Return;
- due date for submission of GloBE Information Return;
- exception for returns provided under automatic exchange of information agreement;
- due date for payment;
- penalties and interest; and
- recordkeeping and expiry of periods of limitations.