The National Treasury published the 2026 draft Tax Administration Laws Amendment Bill (‘TALAB’) at the end of July 2026. It contains administrative changes that reach beyond the Tax Administration Act. In this article, I discuss three proposals in the draft TALAB.
PAYE for foreign employers with a South African permanent establishment
Paragraph 2(1) of the Fourth Schedule to the Income Tax Act (ITA) is the core employees’ tax (PAYE) provision. It lists the employers who must deduct or withhold PAYE when they pay remuneration to an employee. Item (b) covers a non-resident employer that conducts business through a permanent establishment (PE) in South Africa.
The commentary to the proposed change acknowledges that this wording is arguably too wide. A foreign company with a South African PE may also employ South African residents in its home jurisdiction. On the current wording, it must withhold PAYE on their remuneration even if they have nothing to do with the PE. That was not the intention. The proposal is to narrow the obligation. The employee must be effectively connected to the employer’s South African PE before the withholding obligation applies.
Provisional tax: estimates deemed equal to payments
Under the current rules, a taxpayer can submit an acceptable estimate within the range that does not attract an underestimation penalty but pay less, or no, provisional tax. That conduct attracts only the late payment penalty. There is no underestimation penalty because the estimate itself was acceptable.
The proposal is to deem the estimate to be equal to the actual payment. If no payment is made, the estimate is deemed to be nil. The conduct then attracts the underestimation penalty rather than the late payment penalty. The commentary suggests that the existing rules against overlapping penalties should prevent any duplication. The proposed effective date is 25 February 2026. That is the date on which the change was announced in the Budget.
Combining a VDP application with interest remittance
The voluntary disclosure programme (VDP) allows a taxpayer who has committed a default to disclose it voluntarily to SARS. The relief includes reduced understatement penalties, no administrative penalties and no criminal prosecution by SARS. The tax and the interest on the tax remain payable. That interest can be a significant part of the final liability. The process ends in a VDP agreement.
The Constitutional Court recently ruled that a concluded VDP agreement cannot be amended. It also ruled that the VDP process cannot be combined with a request to remit interest. The relief is proposed to be extended. Under the proposal, an applicant will be able to request remittance of interest under the relevant tax Act at the same time as the VDP application. Read with the proposed changes to section 230 of the Tax Administration Act, 28 of 2011, it appears the request will form part of the VDP process. The proposed effective date is 1 March 2026, expressly to cater for some existing applications.
Take-home message
Most of the changes in the draft TALAB are technical or minor. For affected taxpayers, they can have a significant impact, and practitioners should be aware of them, especially given that two of the three proposals I discuss in this article assist taxpayers.
I discuss these proposals in Episode 85 of my podcast, Tax Break. You can listen at this link:
