South Africa’s National Treasury and the South African Revenue Service (SARS) have released the 2026 Draft Taxation Laws Amendment Bill (TLAB) and the 2026 Draft Tax Administration Laws Amendment Bill (TALAB), proposing a series of tax reforms aimed at strengthening compliance, reducing tax avoidance and modernising the country’s tax system.
The draft legislation, now open for public comment, contains measures announced during the 2026 National Budget and introduces additional technical amendments affecting individuals, businesses, financial institutions and tax administration.
Among the most significant proposals are changes to donations tax rules between spouses, expanded medical aid tax credits, tighter anti-avoidance provisions for businesses operating in Special Economic Zones (SEZs), and stronger safeguards against fraudulent tax refunds.
The public has until 28 August 2026 to submit written comments before the draft legislation is finalised and introduced in Parliament.
Tax Changes Target Individuals, Businesses And Medical Aid Members
One of the key proposals would limit the existing donations tax exemption between spouses so that it applies only where the receiving spouse is a South African tax resident.
Treasury said the amendment is intended to close a loophole that could allow taxpayers to delay changes to their tax residency status in order to avoid donations tax and capital gains tax.
The draft legislation also proposes expanding eligibility for the Medical Scheme Fees Tax Credit and the Additional Medical Expenses Tax Credit.
Under the proposal, members of certain restricted medical schemes would become eligible for these tax benefits through the introduction of a formal tax definition for “restricted medical schemes.” These schemes currently fall outside the regulatory framework of the Council for Medical Schemes because of legislative exclusions.
For businesses, Treasury has proposed introducing domestic transfer pricing rules for transactions involving companies operating inside Special Economic Zones and their related entities outside those zones.
The proposal would apply the internationally recognised arm’s length principle to ensure transactions reflect market value while maintaining the preferential 15% corporate income tax available to qualifying SEZ companies.
Additional amendments also seek to align currency translation rules governing Controlled Foreign Companies (CFCs) and Domestic Treasury Management Companies (DTMCs), with implementation proposed from 1 January 2027.
Stronger Tax Administration And Fraud Prevention
The Draft Tax Administration Laws Amendment Bill introduces several measures designed to strengthen tax administration and combat fraud.
Treasury proposes expanding documentation requirements for dealers trading in second-hand goods by aligning VAT record-keeping requirements with the Second-Hand Goods Act.
The government also wants to provide banks with explicit authority to screen tax refunds before or after payment. Where suspicious refunds are identified, banks would be required to hold the funds for up to two business days while SARS conducts investigations.
Another amendment addresses inconsistencies relating to taxpayers’ compliance status.
Current legislation automatically treats taxpayers as compliant while SARS considers requests to suspend tax payments, but similar protection does not exist for taxpayers awaiting decisions on requests for penalty remission.
Treasury proposes correcting this inconsistency to improve fairness and administrative certainty.
Following the public consultation process, National Treasury and SARS will review submissions before finalising the legislation for consideration by Parliament.
If adopted, the reforms are expected to strengthen South Africa’s tax administration, improve compliance, protect government revenue and provide greater clarity for taxpayers while supporting a more transparent and efficient tax system.
Source: National Treasury; South African Revenue Service (SARS).