In brief
The 2026 Budget is expected to prioritise fiscal stability, administrative efficiency and stronger tax enforcement rather than major policy shifts. Headline rates across VAT, income tax and corporate tax are likely to remain unchanged, with revenue instead supported through bracket creep, targeted adjustments and enhanced compliance measures. South African Revenue Service's (SARS's) expanded technological capabilities, data‑driven enforcement and focus on illicit trade, trusts, transfer pricing and cross‑border activity will shape the compliance environment. Businesses should also expect ongoing implementation of Phase 2 carbon tax changes and further progress on VAT modernisation. With greater scrutiny across all tax types, taxpayers would benefit from reviewing their compliance, governance and reporting frameworks ahead of the Minister's announcements.
In more detail
As Minister Enoch Godongwana prepares to deliver the 2026 Budget speech, few analysts are predicting dramatic tax announcements. Instead, the focus is likely to be on maintaining fiscal stability, improving state capability and finding practical ways to support economic recovery, while trying to keep spending pressures in check. Practically, this usually means that the headline tax rates will stay the same, while the overall tax burden quietly grows through bracket creep, targeted adjustments and stronger enforcement.
A delicate balance can be expected between political constraints, economic realities and the need to keep revenue on track. The Minister will need to chart a steady course as he advances National Treasury's strategy of 'fostering faster inclusive growth' guided by the four pillars of maintaining macroeconomic stability, implementing structural reforms, strengthening state capability and accelerating infrastructure investment.
Potential Tax Changes
Value Added Tax (VAT) continues to occupy a contentious space in South Africa's tax landscape, particularly after the proposed 2025 increase was withdrawn following significant public and political resistance. With this in mind, we are unlikely to see a VAT rate increase above the current 15%. National Treasury instead appears more focused on administrative efficiencies, including making progress on the VAT Modernisation project aimed at introducing real‑time or close to real-time transmission and reporting. This will place greater emphasis on data readiness and internal alignment for businesses.
Excise taxes on cigarettes and alcohol remain a predictable revenue stream for National Treasury, and this year is likely to be no different. As announced by the President in the State of the Nation Address on 12 February, minimum unit pricing or higher excise duties is potentially on the cards as government seeks to bolster revenue collection. In the recent past these increases have not been below inflation.
Carbon tax entered Phase 2 on 1 January 2026, bringing a substantial shift in both rates and allowances. The headline rate is expected to increase from R236 per tonne of CO2e to R308, representing a 30.5% rise. At the same time, allowances are expected to tighten through a reduction of the basic tax-free allowance by 10%, alongside increases in the offset allowance by 15% and the performance allowance for combustion emissions by 5%. These changes indicate a stronger compliance environment, and businesses with meaningful emissions should pay close attention to data integrity, modelling, compliance and reporting frameworks.
The Budget is expected to offer only limited personal income tax relief, with National Treasury signalling a continued reliance on bracket creep to support revenue collection. Modest personal income tax relief may be considered, in light of it being an election year, but any adjustments are expected to be limited. South Africa already maintains relatively high personal income tax rates and a tax-to-GDP ratio above that of many comparable economies, as the Minster highlighted last year. This makes bracket creep a more likely mechanism for additional revenue collection than substantive rate changes.
Corporate income tax is similarly expected to remain unchanged at 27%, consistent with the Minister's ongoing commitment to maintaining competitiveness and avoiding measures that could deter foreign investment.
No adjustments are anticipated to the CGT regime. National Treasury has not signalled any intention to revisit inclusion rates or effective rates within CGT, and stability in this area aligns with its broader objective of fostering certainty and investor confidence in the tax environment.
Likely Tax Enforcement Focus
Tax administration is expected to remain a central focus of the 2026 Budget, following significant investment in SARS' modernisation and enforcement capabilities. Last year, SARS received approximately R7.5 billion to strengthen its administrative capacity, broaden the tax base and enhance the use of technology, data science and artificial intelligence. This investment is already translating into more robust compliance measures, including stepped-up action against unregistered taxpayers, non-filers with substantial economic activity and enhanced debt-collection processes.
National Treasury, in the Medium-Term Budget Policy Statement, indicated that SARS's performance will inform the decision on whether to withdraw the proposed R20?billion in additional tax measures for 2026. It is anticipated that the Minister will announce this decision during the Budget speech. As SARS continues to scale its enforcement operations, taxpayers can expect greater scrutiny across return submission behaviours, outstanding liabilities and economic activity mismatches.
SARS is also intensifying efforts to combat illicit trade. The medium Term Budget Policy Statement highlighted that there is an estimated R40 billion in excise revenue leakage. In order to curb this, customs officials are expected to apply heightened oversight to prevent tax leakages and reduce the inflow of illicit goods.
The existing general voluntary disclosure programme (VDP) (under the Tax Administration Act) explicitly excludes Customs and Excise duties. As of February 2026, the dedicated Customs and Excise VDP introduced in the 2025 Draft Tax Administration Laws Amendment Bill (TALAB) is not yet in effect. While the proposed legislation (specifically the insertion of Chapter XB into the Customs and Excise Act) marks a significant policy shift, it remains in the legislative pipeline.The proposed VDP for customs and excise, will offer taxpayers an opportunity to regularise historic non compliance before enforcement escalates. Businesses with exposure to excisable goods or material import activity may wish to evaluate whether a VDP application is appropriate in light of SARS's strengthened enforcement posture.
In December 2025, SARS awarded a tender to Moody's Analytics UK Limited for the provision of a transfer pricing benchmarking tool. This marks a significant step in enhancing its ability to assess arm's length pricing in transactions involving connected persons or associated entities. This capability is expected to support the future rollout of the Advance Pricing Agreement Programme, which should provide greater certainty to multinational taxpayers while strengthening SARS's audit and litigation readiness.
In parallel, SARS continues to implement regulatory frameworks aligned with international standards. This includes the gazetting of regulations to operationalise the Organisation for Economic Cooperation and Development (OECD) Crypto-Asset Reporting Framework International Standard for the Exchange of Tax-Related Information (CARF). This framework is expected to enable SARS to automatically exchange tax-relevant crypto-asset information with other jurisdictions. Taxpayers with undisclosed foreign crypto-asset holdings may wish to consider the VDP to mitigate tax understatements or administrative penalties.
On the exchange control front, no major policy shifts are expected in the 2026 Budget. However, SARS's enhanced transfer pricing and cross border data analytics capabilities indicate that multinational groups should ensure alignment between their tax, exchange control and transfer pricing positions. Businesses with complex offshore structures or intercompany funding arrangements may benefit from an interrogation of their compliance position ahead of anticipated increases in coordinated enforcement between SARS and the Financial Surveillance Department of the South African Reserve Bank.
SARS has also continued to strengthen compliance in the trust environment. In September 2025, it issued updated guidance expanding the definition of a trust to include portfolios of collective investment schemes and hedge‑fund collective investment scheme. This bringing these structures into the trust‑filing net. In addition, SARS now requires comprehensive disclosure of all beneficial owners, including deceased founders and unnamed beneficiaries, in order to align with the Financial Action Task Force transparency standards. This information must be submitted upon registration and during the annual filing season via eFiling, and trust taxpayers should be prepared to upload supporting documentation. With increased scrutiny of trusts use in estate planning structures and a stronger emphasis on transparency around beneficial ownership, taxpayers should ensure that their trust arrangements are well documented, compliant and able to meet heightened regulatory expectations.
As the 2026 Budget approaches, businesses should prepare for a more assertive, data and tech driven compliance environment in South Africa's tax landscape. While the Budget may not introduce dramatic tax policy changes, the cumulative effect of tighter administration, enhanced transparency standards and increased enforcement will be felt across all sectors.
Now is an ideal moment for taxpayers to assess their compliance status, from income tax treatment and indirect tax compliance to transfer pricing justifiability, carbon tax modelling and trust disclosures. Engaging advisors early can help organisations identify potential risks, strengthen governance frameworks and ensure they are well positioned to navigate the year ahead with confidence.
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Nosipho Makhanya, Trainee Solictor, has contributed to this legal update.