SA expected to raise R8bn from global minimum tax rate

The government expects to raise R8bn in 2026/27 from the implementation of the global minimum corporate tax rate of 15%, which it plans to introduce for qualifying multinationals from January 1, 2024. 

The aim of the global tax is to limit the race to the bottom of effective corporate tax rates for large multinationals as countries compete to attract them by offering low tax rates and tax incentives. 

A draft Global Minimum Tax Bill, which was published on Wednesday, will provide more details on the proposal. 

“Implementing the minimum tax in SA will bolster the corporate tax base,” Treasury says in the Budget Review.

The global minimum tax will ensure that any multinational with annual revenue exceeding $750m will be subject to an effective tax rate of at least 15% regardless of where its profits are located. 

“Government proposes to effect this change — an income inclusion rule and a domestic minimum top-up tax — for qualifying multinationals from 1 January 2024,” the Treasury said. 

“The income inclusion rule will enable SA to apply a top-up tax on profits reported by qualifying SA multinationals operating in other countries with effective tax rates below 15%. The domestic minimum top-up tax will enable Sars [SA Revenue Service] to collect a top-up tax for qualifying multinationals paying an effective tax rate of less than 15% in SA.” 

A framework to limit the channels that multinationals use to shift profits from high to low tax countries was endorsed by more than 135 countries in 2021. 

The global minimum corporate tax rate plan follows the development of tax rules to address base erosion and tax challenges arising from the digitalisation of the economy.

The plan to deal with the digital economy will be implemented through a multilateral convention to ensure that the biggest and most profitable multinationals reallocate part of their profit to all countries where they sell their products and provide their services. 

ensorl@businesslive.co.za