South Africa’s Third Budget Speech of 2025: Key Takeaways and Tax Implications
South Africa’s third budget speech of 2025, delivered by Finance Minister Enoch Godongwana on May 21, 2025, strikes a cautious but deliberate tone. With economic recovery still fragile and fiscal consolidation in focus, this mini-budget signals more tightening of the belt—particularly through enhanced revenue collection rather than new tax hikes.
Below, we outline the key highlights, with special attention to tax policy and consequences for individuals, businesses, and the economy.
NO INCREASE IN THE VAT RATE.
1. No Major Tax Rate Changes—But the Net Is Widening
Minister Godongwana announced that there will be no adjustments to personal income tax, corporate income tax, or VAT rates in this budget cycle. However, that doesn’t mean the tax burden is standing still.
🔍 Key Point: While rates are unchanged, the government plans to raise revenue through improved compliance, digital enforcement, and efficiency gains at SARS.
SARS has been allocated an additional R4.6 billion over the next two years to enhance audit capabilities and modernize systems. This means:
-
More audits and enforcement, especially targeting high-net-worth individuals, trust structures, and cross-border transactions.
-
Increased scrutiny of small businesses in the informal sector.
-
Crackdowns on customs fraud and under-declared imports.
2. Wealth and Capital Gains Under the Microscope
Though not altered in this speech, wealth taxation remains under active review. Treasury is continuing to explore:
-
A potential net wealth tax framework (studies are ongoing).
-
Adjustment of capital gains tax (CGT) inclusion rates, possibly in the 2026 main budget.
-
Revisions to estate duty and donations tax thresholds.
⚠️ Implication: High-net-worth individuals and estate planners should expect greater disclosure requirements and possible reforms in 2026.
3. Sin Taxes and Carbon Pricing: Incremental Increases
The budget includes routine but impactful increases in excise duties, often called “sin taxes”:
-
Alcohol excise taxes increase between 6.5% and 9%.
-
Tobacco products see a 7.2% increase in excise duty.
-
The carbon fuel levy rises from 10c to 12c per litre for petrol and diesel.
These increases are intended to raise approximately R3.2 billion in additional revenue in 2025/26.
🌍 Environmental note: Treasury reaffirmed its intention to implement broader carbon pricing mechanisms, including carbon budgets and potential future emissions-based taxes.
4. Corporate Tax Administration Gets Tighter
Though the corporate tax rate remains at 27%, the Treasury is focused on base erosion and profit shifting (BEPS). This includes:
-
Enhanced transfer pricing enforcement for multinationals.
-
Tighter thin capitalization rules and deductions monitoring.
-
Alignment with OECD's Pillar Two Global Minimum Tax recommendations.
🏢 What this means for businesses: Multinationals with complex structures should prepare for additional reporting obligations and limited room for aggressive tax planning.
5. Relief Measures: Limited but Targeted
There were a few targeted measures of relief:
-
Tax-free threshold for personal income tax will remain at R95,750. Due to inflationary increases in salaries some taxpayers will fall in a higher tax bracket. This is known as tax creep or bracket creep.
-
Small business corporation (SBC) thresholds remain unchanged but are under review for better targeting and fraud prevention.
-
Renewable energy incentives, particularly Section 12BA allowances for solar installations, will be extended through 2026, with stricter compliance and registration requirements.
Conclusion: A Quiet Budget with a Louder Tax Message
While the 2025 mini-budget avoided headline tax increases, it quietly sent a powerful message: South Africa is intensifying tax enforcement to plug the fiscal gap. The focus has clearly shifted from raising rates to raising compliance and closing loopholes.
For taxpayers, this means:
-
No immediate rate pain—but less room for avoidance or error.
-
Increased SARS visibility into earnings, deductions, and international assets.
-
A likely evolution toward wealth and environmental taxation in the coming years.
