Global Minimum Tax (GMT) & Pillar Two Basics
South Africa has adopted the GMT legislation as part of its anti-base erosion regime. All multinational enterprise (MNE) groups with consolidated revenue above €750 million (approx R15 billion) are affected. Rules include:
- Income Inclusion Rule (IIR): Parent entities pay top-up tax if foreign subsidiaries are taxed below the 15% minimum effective rate.
- Domestic Minimum Top-up Tax (DMTT): Ensures foreign-sourced income of foreign MNE groups taxed at minimum 15%. Budget 2026 revised revenue projections from GMT down due to updated OECD analysis.(sars.gov.za)
Compliance & Disclosures
- You must submit the Global Minimum Tax Return (GMT01), Declaration (GMT02) and full tax calculation each fiscal year.(sars.gov.za)
- Deadlines: Return/payment due 15 months after the end of the fiscal year, or 18 months for first fiscal years between 1 Jan 2024-31 Dec 2024.(sars.gov.za)
- Simplified Safe Harbour rules may apply for smaller or lower-risk entities. Examine whether Transitional CbCR or Simplified ETR Safe Harbour apply.(sars.gov.za)
Entity Setup Considerations
- When structuring new entities or group expansions abroad, assess whether foreign operations will trigger top-up tax. Consider jurisdictions with favorable tax rates or incentive schemes, but watch out for base erosion rules and substance requirements.
- Use Special Economic Zone (SEZ) regimes in South Africa, which may offer reduced rates (as low as 15%) under the right conditions—but reform of anti-avoidance rules is underway.(sars.gov.za)
- Ensure robust documentation so that when audited, you can demonstrate your ETR calculations, tax payments, and that any DTA claims or exemptions are valid.
Practical Tips & Example
- MNE with a subsidiary in an African country with a low corporate tax rate (say 10%) might now face top-up tax in SA under IIR. Plan whether to reallocate profits, adjust transfer pricing, or make use of treaties.
- A technology group earning R20 billion worldwide: verify whether Sars’ GMT regime applies, prepare disclosures ahead of deadlines, consider Safe Harbour to reduce paperwork.
Key Take-aways
- Early planning is essential—don’t wait until year-end. Changing entity structure or location after the fact may not avoid PDT obligations.
- Consult tax professionals in all jurisdictions where operations exist—treaties, local rates, and administrative burdens vary.
- Keep updated with SARS guidance and updated external guides—they released several updated guides in June 2026 for GMT & tax-directive operation.(sars.gov.za)"