DRAFT EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2022

This draft explanatory memorandum outlines proposed amendments to the Taxation Laws Amendment Bill, 2022, covering income tax, value-added tax (VAT), carbon tax, and customs and excise duties. The proposals aim to resolve technical anomalies, align tax laws with new accounting standards (IFRS 17), curb tax avoidance regarding contributed tax capital, and support South Africa's climate commitments through a ramped-up carbon tax trajectory and extended energy efficiency incentives.

• The government proposes a phased increase in the carbon tax rate to meet National Determined Contribution (NDC) commitments, with rates increasing by US$1, US$2, and US$3/tCO2e for the 2023, 2024, and 2025 tax periods respectively, reaching US$20/tCO2e in 2026 and at least US$30/tCO2e by 2030.
• To support economic recovery and low-carbon transition, the Energy Efficiency Savings (EES) tax incentive and the electricity price neutrality commitment for electricity generators are proposed for extension from 1 January 2023 to 31 December 2025.
• The government intends to introduce a flat excise duty rate of at least R2.90 per millilitre (ml) on both nicotine and non-nicotine solutions used in electronic delivery systems (vaping) to curb demand, particularly among youth, following WHO advice.
• Proposed changes to the definition of 'contributed tax capital' (CTC) aim to prevent the targeted distribution of CTC to specific shareholders within the same class to avoid dividends tax. This includes a 91-day testing period before and after transfers to ensure proportional allocation.
• To align with IFRS 17 Insurance Contracts, the government proposes transitional 'phasing-in' measures for insurers to mitigate tax impacts. Short-term insurers would have a three-year phasing-in period, while long-term insurers would have a six-year period.
• The government proposes to repeal paragraph 4(3) of the Second Schedule to the Act to ensure uniform tax treatment across all retirement funds, removing the current distinction where provident fund members retiring before age 55 for reasons other than ill-health are taxed as withdrawal benefits rather than retirement benefits.
• To prevent 'double-up' claims on interest exemptions and capital gains tax (CGT) annual exclusions when an individual ceases to be a South African tax resident, the government proposes that these amounts be apportioned if the year of assessment is less than 12 months.
• The government proposes to amend the VAT Act to reduce administrative burdens for foreign entities, including allowing a single branch registration for a group of non-resident holding companies and subsidiaries, and excluding 'qualifying purchasers' in flash-title sales from the definition of 'enterprise'.
• The Research and Development (R&D) tax incentive, which allows for a 150 per cent deduction of approved operating expenses, is proposed for extension in its current form until 31 December 2023.
• Proposed amendments to the Carbon Tax Act would limit carbon sequestration deductions to activities within the operational control of the taxpayer, specifically for those in the pulp, paper, and print sector (IPCC code 1A2D), to prevent double claims and monitoring difficulties with third parties.

APA

Centre for Environmental Rights (2022). DRAFT EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2022. https://cer.org.za/wp-content/uploads/2022/09/Draft_Explanatory_Memoradum_on_the_2022_Draft_TLAB-_29_July_20221-1.pdf?x21779

Chicago

Centre for Environmental Rights. DRAFT EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2022. 2022. https://cer.org.za/wp-content/uploads/2022/09/Draft_Explanatory_Memoradum_on_the_2022_Draft_TLAB-_29_July_20221-1.pdf?x21779.

Wikipedia

{{cite report |author=Centre for Environmental Rights |title=DRAFT EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2022 |date=29 July 2022 |url=https://cer.org.za/wp-content/uploads/2022/09/Draft_Explanatory_Memoradum_on_the_2022_Draft_TLAB-_29_July_20221-1.pdf?x21779 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{centreforenvironmentalrights2022draft, author = {{Centre for Environmental Rights}}, title = {{DRAFT EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2022}}, institution = {Centre for Environmental Rights}, year = {2022}, month = jul, url = {https://cer.org.za/wp-content/uploads/2022/09/Draft_Explanatory_Memoradum_on_the_2022_Draft_TLAB-_29_July_20221-1.pdf?x21779}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }