South Africa is proposing changes to the tax rules for Special Economic Zones (SEZs) that could make it easier for businesses to use the zones and potentially create opportunities for smaller firms in their supply chains.
The proposed reform is contained in the 2026 Draft Taxation Laws Amendment Bill, published by National Treasury and the South African Revenue Service (SARS) on 30 July.
SEZs were created to attract investment, promote manufacturing and exports and create jobs.
Qualifying companies operating in approved SEZs can access a 15% corporate income tax rate, compared with the standard 27% rate. The incentive is intended to make investing in SEZs more attractive.
The government also introduced an anti-profit-shifting rule to stop companies from moving profits into SEZs simply to benefit from the lower rate.
Under the current rules, a qualifying SEZ company can lose the 15% incentive if more than 20% of its income or deductible expenditure comes from transactions with certain connected companies outside the SEZ.
Treasury says the rule can also affect legitimate businesses with supply chains spread across related companies.
Government to replace the 20% rule
The draft legislation proposes replacing the current 20% threshold with an arm’s-length pricing test.
Instead of automatically putting the tax incentive at risk when connected-party transactions exceed 20%, the new approach would assess whether transactions are priced as they would be between independent businesses.
Tax specialists Marcus Stelloh and Hanro Pienaar of BDO said the threshold has not always fitted ordinary group structures, particularly where manufacturing, marketing or other parts of a supply chain are handled by separate companies.
They said the reform could allow such businesses to potentially access the 15% rate if their pricing is properly supported.
“Early review should place taxpayers in a stronger position both to manage risk and to identify opportunities that may have been constrained under the current threshold-based regime,” Stelloh and Pienaar said.
How businesses could benefit
The proposed reform does not give SMMEs a new 15% tax rate.
The potential opportunity is through increased investment and activity in SEZs, which could create demand for smaller manufacturers, logistics companies, warehouses, maintenance providers, packaging firms and construction businesses operating in the zones.
University of Cape Town associate professor Deborah Tickle described the amendment as more “business-friendly” and said it could benefit businesses operating in SEZs.
“From an economic perspective it is also positive because it may attract more foreign businesses to set up their operations in a SEZ,” Tickle said.
The potential benefit is therefore not the tax rate itself, but the possibility of more investment, more companies operating in SEZs and more demand for local suppliers.
Businesses and other interested parties have until 28 August 2026 to submit comments on the draft tax bills.
