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Navigating the Updated Assessed Losses Landscape in South Africa

Navigating tax regulations is a crucial part of any business’s financial planning. Recent changes to South Africa’s assessed losses tax limitations and corporate income tax rates make it even more critical to stay informed, up-to-date, and compliant. Adapting to sudden or unexpected tax updates is often a challenging process, as navigating the world of taxes in an unstable economy becomes more complicated by the day. At Nwanda, our specialists can guide you through every update, making sure your business and personal finances are set up for success.   

The Updated Assessed Loss Tax Limitation

Companies in South Africa previously had the option to offset 100% of their assessed losses against the next year’s taxable income, with any remaining balance rolling over to subsequent years. However, the new rules dictate that assessed losses can now only offset 80% of taxable income or R1 million, whichever is higher. This change may not affect some companies, such as those with taxable incomes under R1 million, but others may see increased tax liabilities. The amendment will be effective for companies with years of assessment ending on or after 31 March 2023.

Corporate Income Tax Rate Reduction

The Minister of Finance announced a 1% reduction in the corporate income tax rate, lowering it from 28% to 27% for companies with a tax year ending on or after March 31, 2023.

Impact on Companies

The changes to assessed losses and corporate income tax rates in South Africa will have varying impacts on different companies. Smaller companies with taxable incomes below R1 million remain unaffected by the new assessed loss rules. However, companies with taxable income exceeding R1 million will now pay income tax on up to 20% of their taxable income, regardless of their assessed loss balance. Companies that do not adapt to these changes risk facing significant tax cash flow implications.

Seeking Professional Advice

Navigating the ever-evolving tax landscape in South Africa can be challenging, but seeking professional advice can help ensure your business remains compliant and well-informed. At Nwanda, our team of experts can provide the guidance your company needs to adapt to these changes and plan for the future. We understand the complexities of the tax system and can help you make informed decisions that secure your business’s financial health.

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein.  Our material is for informational purposes and should not be construed as financial advice.

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