South Africa · Administrative guidance
South Africa SEZ guide separates company relief from building allowances
On 27 October 2026, the South African Revenue Service published its guide to income-tax benefits in special economic zones, explaining company qualification, connected-party restrictions and the separate building allowance. The guide is non-binding and does not enact the proposed 2027 reforms.
- Official document:
- SARS Guide to Income Tax Benefits in Special Economic Zones, 27 October 2026; Income Tax Act 58 of 1962 sections 12R and 12S
- Development date:
- 2026-10-27
Location is only the starting point
Under Income Tax Act 58 of 1962 section 12R, a company must be incorporated or effectively managed in South Africa, trade from a fixed business location in a designated and approved zone, and derive at least 90% of its income from trade within one or more such zones. It must also meet the statutory trade-history, new-trade or expansion pathway. Moving an existing group activity into a zone does not automatically qualify.[2]
Connected-party flows can disqualify
Section 12R(4)(c) disqualifies a company where more than 20% of deductible expenditure or relevant income arises from transactions with connected South African residents, or connected nonresidents where the transactions are attributable to a South African permanent establishment. Deductible expenditure is not limited to deductions actually claimed. Listed manufacturing activities and specified separate service trades can also exclude the company; ancillary activities require the guide’s fact-specific analysis.[2]
Assess the building allowance separately
Section 12S defines qualifying company notwithstanding section 12R(4). Failure of the connected-party test therefore does not automatically eliminate its building allowance. The separate conditions include ownership of a new and unused building or improvement in an approved zone, wholly or mainly income-producing business use, and no residential accommodation. Groups need distinct company-qualification, transaction and building evidence rather than one blanket incentive conclusion.[2]
Keep the proposed replacement separate
Bill B32—2026, introduced on 21 October, proposes deleting section 12R(4)(c) and extending section 31 arm’s-length rules to specified domestic connected-party transactions involving qualifying zone companies. Its proposed application is to assessment years starting on or after 1 January 2027; the bill is not evidence that this replacement already operates. Straxiom’s earlier tax-bills overview covers that proposal. This later guide explains the existing framework and is neither a binding ruling nor a new VAT, customs or filing-deadline measure.[2][3][4]
Official sources
- [1] SARS publication notice
South African Revenue Service · Document date: 2026-10-27
Notice dated 27 October 2026 linking the SEZ guide.
- [2] Guide to Income Tax Benefits in Special Economic Zones
South African Revenue Service · Document date: 2026-10-27
Fresh selected reading: preface; sections 4.1, 4.2.1–4.2.3, 5.1; examples 13–19; statutory annex sections 12R/12S at PDF pages 59–61 (zero-based). Current-law reproduction compared directly with B32 clauses 10 and 15. Not a full 64-page review.
- [3] Taxation Laws Amendment Bill B32—2026
South African Revenue Service / National Assembly · Document date: 2026-10-21
Introduced bill; clauses 10 and 15, PDF pages 7–9 zero-based: deletion of section 12R(4)(c), domestic section 31 extension, proposed 1 January 2027 assessment-year start. Selected provisions read, not a whole-package re-review.
- [4] SARS Bills register
South African Revenue Service · Document date: 2026-10-21
2026 register: B32 introduced in National Assembly 21 October 2026; no enactment inferred.