Pillar 2 Dashboard: South Africa

On October 28, 2025, Government Notice No. 6763 was issued which extended some of the Pillar 2 filing and notification deadlines.

On December 24, 2024, South Africa published the Global Minimum Tax Act in its Official Gazette. This applies an IIR and QDMTT from January 1, 2024.

On January 9, 2025, the Global Minimum Tax Administration Act 47 of 2024 was published.

On October 30, 2024 the Global Minimum Tax Bill and the Global Minimum Tax Administration Bill were sent to the National Assembly.

On February 21, 2024, the National Treasury and the South African Revenue Service issued the Draft Global Minimum Tax Bill, and the Draft Global Minimum Tax Administration Bill for consultation.

GENERAL

Part II of the GMT Act transposes the OECD GloBE Model Rules into South African legislation by reference to the GloBE Model Rules, Commentary and Agreed Administrative Guidance. A dynamic reference is provided in Section 2 and 3 of the GMT Act. In the Explanatory Notes to the GMT Bill this is confirmed as an ‘ambulatory’ approach.

This means that the reference in domestic law updates every time the Commentary and Administrative Guidance is updated providing the Minister publishes a notice in the Official Gazette.

Section 2 of the GMT Act provides that, under this approach, when applying the GloBE Model Rules and Commentary, the most recent version of the Commentary will apply (updated by any Administrative Guidance that has been published before the start of the fiscal year) in respect of calculations that are being performed.

Section 3 of the GMT Act states that wherever the GloBE Model Rules refer to the term “[insert name of implementing jurisdiction]” this is treated as referring to South Africa.

Section 4 of the GMT Act specifically applies the top-up tax calculation in the GloBE Model rules for the purposes of the IIR.

Certain provisions of the OECD Model Rules are specifically excluded in Section 5 of the GMT Act as they relate to the UTPR which is not being implemented in South Africa. This includes Articles 2.4 to 2.6 (UTPR charging provisions) and Article 9.3 (exclusion from the UTPR of MNE Groups in the initial phase of their international activity)).

Currency Conversion

Section 22 of the GMT Act provides that if the top-up tax liability is calculated in a foreign currency, the top-up tax for the Fiscal Year must be translated into Rands by using the average exchange rate as defined in the Income Tax Act for the Fiscal Year to which the tax relates.

Administrative Guidance

Section 2 of the GMT Act states that the application of the GloBE Model Rules in South Africa is to be determined in accordance with the Administrative Guidance to the GloBE Model Rules before the start of the Fiscal Year in which the time falls. The applicable OECD Administrative Guidance defined in Section 1 of the GMT Act includes the February 2023, July 2023 and December 2023 OECD Administrative Guidance, as well as ‘any similar document subsequently released by the Inclusive Framework’ (where that has been approved by the Minister).

Additionally the most recent version of the OECD Commentary will apply (updated by any Administrative Guidance that has been published before the start of the fiscal year) in respect of calculations that are being performed.

Therefore, all aspects of all of the OECD Administrative Guidance released up to and including the December 2023 OECD Administrative Guidance would apply for South African purposes.

Note that whilst South Africa transposes future updates to the OECD GloBE Rules into domestic law (subject to Ministerial approval in the Gazette), the exception to this is that the definition of GloBE Model Rules refers to the 2021 OECD Model Rules as amended – except for any amendments to the definition of the minimum rate in Article 10.1.1 of the GloBE Model Rules. Therefore, if the minimum rate was to be amended from 15% this would require further legislative action in South Africa.

Safe Harbour and Penalty Relief Guidance

Section 2 of the GMT Act states that the application of the GloBE Model Rules in South Africa is determined in accordance with the Safe Harbours before the start of the Fiscal Year in which the time falls.

Safe Harbours are defined in Section 1 of the GMT Act as exceptions provided in Article 8.2.1 of the GloBE Model Rules which have been approved by the Inclusive Framework and set out in:

1. The OECD Safe Harbours and Penalty Relief Guidance;
2. The OECD Administrative Guidance; and
3. Any similar document subsequently released by the Inclusive Framework (subject to Ministerial approval in the Gazette).

As such, all Safe Harbours included in the OECD Safe Harbour Guidance and OECD Administrative Guidance are transposed into South African Law. This includes the:

-Transitional CbCR Safe Harbour

-QDMTT Safe Harbour

-NMCE Simplified Calculations Safe Harbour.

ELECTIONS

Elections in the OECD Model Rules

As the GloBE Model rules are transposed into South African Law by way of a dynamic reference, all elections in the OECD Model Rules apply for South African purposes. This, therefore, includes the:

-Excluded Entity Election

-Election to use the Realization Method

-Stock-Based Compensation Election

-Election to Spread Capital Gains

-Consolidation Election

-GloBE Loss Election

-Tax Transparency Election

-Taxable distribution Election

-Unclaimed Accrual Election

-Distribution Tax Regime Election

-Substance-Based Income Exclusion Election

-Prior Year Adjustment Election

-De minimis Election

Elections in the Administrative Guidance

As the OECD Administrative Guidance is transposed into South African Law by way of a dynamic reference, all elections in the OECD Administrative Guidance apply for South African purposes. This therefore includes the:

-Excess Negative Tax Carry-Forward Election;

-Debt Release Election;

-Equity Investment Inclusion Election;

-Foreign Exchange Hedge Election;

-Portfolio Shareholding Election.

DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE

As the GMT Act transposes the OECD Model Rules and other OECD Guidance into domestic law, there are no significant differences from the OECD rules.

However, Article 5 of the GMT Act does specifically exclude the UTPR charging provisions (in Articles 2.4 to 2.6 of the OECD Model Rules) and the initial phase of international activity exemption (in Article 9.3 of the OECD Model Rules) from the South African law.

DOMESTIC MINIMUM TAX

Part IV of the GMT Act includes a domestic minimum tax that is likely to be a QDMTT. This allows South Africa to levy top-up tax on the profits of low-taxed South African -based entities of MNE groups that don’t have a UPE in South Africa.

The calculation of the QDMTT is relatively straightforward. In particular it applies the top-up tax calculated under the general GloBE rules and then subjects this to a number of adjustments.

General

Section 8 of the GMT Act provides that the domestic minimum tax applies to Domestic Constituent Entities and the starting point is that it is calculated in accordance with the Model GloBE Rules.

Exclusions

Section 9 of the GMT Act then excludes a number aspects of the Model GloBE Rules from the domestic minimum tax calculation.

These are:

Provisions that Allocate Top-Up Tax

Provisions of the GloBE Model Rules that allocate the Jurisdictional Top-up Tax to individual Constituent Entities do not apply, because the domestic minimum tax charges the total Jurisdictional Top-up Tax so it is not necessary to allocate this between Constituent Entities.

As such the following Articles of the OECD Model Rules are not relevant for domestic minimum tax purposes:

-Article 5.2.4 (allocation of Top-up Tax amongst Constituent Entities);

-Article 5.2.5 (allocation of Top-up Tax amongst Constituent Entities when no Net GloBE Income for Fiscal Year);

-Article 5.4.2 (allocation of Additional Current Top-up Tax in connection with Article 5.4.1);

-Article 5.4.3 (allocation of Additional Current Top-up Tax in connection with Article 4.1.5);

-Article 5.4.4 (determination as Low-taxed Constituent Entity).

Specific Structures

Certain provisions of the Model GloBE Rules modify how the GloBE rules apply to certain  structures. These do not need to be incorporated into the domestic minimum tax eg as they are not relevant for South African tax purposes. This includes:

-Article 6.2.1(h) of the Model GloBE Rules which applies where a target is required to apply the IIR as a Parent Entity of one or both MNE Groups. It provides that the target shall apply the IIR separately to its Allocable Shares of the Top-Up Tax of Low-Taxed Constituent Entities determined for each MNE Group.

-Articles 6.4.1(b) and 6.4.1(c) which describes how the IIR and UTPR is applied to Joint Ventures (JVs) and JV Subsidiaries.

-Article 6.5.1(e) and (f) that describes how the IIR and UTPR is applied in the context of a Multi-Parented MNE Group.

-Article 7.3 of the GloBE Model Rules (Eligible Distribution Tax Systems) as this only applies to a jurisdiction that had a distribution tax system prior to July 1, 2021.

-Article 9.3 of the GloBE Model Rules that applies an exclusion from the UTPR of MNE Groups in the initial phase of their international activity

Pushdown Taxes

The GloBE Model Rules stipulate that the Adjusted Covered Taxes for each Domestic Constituent Entity are to be calculated by including any tax accrued by a Constituent Entity-owner located in another jurisdiction with respect to the GloBE Income of a Domestic Constituent Entity. The GloBE rules that allocate taxes of a Constituent Entity-owner are:

-Article 4.3.2(a) of the GloBE Model Rules which allocates taxes to a Permanent Establishment,

-Article 4.3.2(c) of the GloBE Model Rules which allocates taxes to a controlled foreign company; and

-Article 4.3.2(d) of the GloBE Model Rules which allocates such taxes to hybrid entities.

The February 2023 OECD Guidance provides that these allocations must be disregarded for a domestic minimum tax to qualify as a QDMTT.

In addition, it provides that taxes on dividends or other distributions that would otherwise be allocated to a distributing Domestic Constituent Entity under Article 4.3.2(e) of the Model GloBE Rules shall also be excluded from the DMTT calculation.

Section 12 of the GMT Act excludes all of these allocations for the purposes of the South African domestic minimum tax.

Exclusion of domestic taxes on certain foreign income

Section 13 of the GMT Act provides that the Adjusted Covered Taxes for each Domestic Constituent Entity are to be calculated excluding tax accrued by Domestic Constituent Entities with respect to the income of, or dividends received from, Constituent Entities located in another jurisdiction.

Ownership Interests

In order for a domestic top-up tax to be a QDMTT, the OECD Administrative Guidance provides that Top-up Tax that is subject to the QDMTT must be based on the whole amount of the Jurisdictional Top-up Tax calculated, irrespective of the Ownership Interests held in the Constituent Entities located in the QDMTT jurisdiction by any Parent Entity of the MNE Group.

This is provided in Section 14 of the GMT Act.

Avoiding Circularity

In order to avoid circularity, the top-up tax calculation formula for the QDMTT must be amended so that the QDMTT itself is not deducted. Section 16 of the GMT Act provides for this.

Separate ETR Calculations

Section 16 of the GMT Act provides for separate Domestic Minimum Top-up Tax calculations for Minority-Owned Constituent Entities, Investment Entities, Domestic Joint Venture Groups and other Domestic Constituent Entities.

Accounting Standard

The South African QDMTT applies the general GloBE rules to determine the accounting standard used. As such, the domestic minimum tax is calculated using the financial accounting standard of the UPE, and, if that is not practicable, on the basis of an accepted accounting standard or an approved accounting standard, if:

• the constituent entity’s financial statements are prepared in accordance with that standard,
• the information contained in the financial statements is reliable; and
• permanent differences of more than EUR 1 million are conformed with the UPEs accounting standard.

Safe Harbours

As noted above, the OECD Safe Harbours are transposed into domestic law, however, Section 11 of the GMT Act excludes the QDMTT Safe Harbour for QDMTT purposes.

Transition Years

Sections 17-19 of the GMT Act apply the approach taken in the OECD Commentary to cases where the first Fiscal Year that a QDMTT applies to domestic Constituent Entities located in South Africa is before or after the first Fiscal Year in which the GloBE Rules apply to those Constituent Entities. In particular, various tax attributes are amended as provided in paragraphs 118.49.1 and 118.49.2 of the OECD Commentary.

Registration

Not provided in the GMT Administration Act.

Filing

The relevant aspects of the submission of a GloBE Information Return (GIR) are included in Section 2 of the GMT Administration Act.

Every Constituent Entity located in South Africa will have an obligation to file a GIR in South Africa. However, this obligation can be discharged if the GIR is filed by a Designated Filing Entity.

Where the GIR is being filed by the Designated Filing Entity, the Constituent Entity, must file a notification with the Revenue no later than six months prior to the filing due date of the GIR.

The notification must contain all information necessary for the correct application of the Top-Up Tax.

Section 4 of the GMT Administration Act also provides that a Domestic Constituent Entity need not submit the GIR if the tax authority is notified that the return has been submitted by:

-the UPE located in a jurisdiction that has a Qualifying Competent Authority Agreement in effect with South Africa for the reporting fiscal year; or

– a Designated Filing Entity located in a jurisdiction that has a Qualifying Competent Authority Agreement in effect with South Africa for the reporting fiscal year.

Again, a Domestic Constituent Entity must notify the tax authority of the identity of the Entity that submits the GIR and the jurisdiction in which it is located within six months prior to the filing due date of the GIR.

The GIR must be filed no later than 15 months after the end of the fiscal year (with an 18-month deadline for the Transition Year).

The GMT Administration Act defines a GIR as the OECD GIR for international transactions and a domestic return under the Tax Administration Act for domestic transactions. Therefore, the provisions above for the GIR would apply by default for the domestic tax return and the GIR filing deadlines would apply.

Payment

Under Section 5 of the GMT Administration Act, payment of top-up tax must be made by the deadline for filing the GIR.

Penalties

Section 8 of the GMT Administration Act provides that an administrative non-compliance penalty of R50,000 may be imposed for the failure to file a GIR of pay any top-up tax due.

None issued.