Recent Policy Shifts to Know
South Africa
- VAT thresholds have been raised effective 1 April 2026—compulsory registration is now at R2.3 million annual taxable supplies (up from R1 million), and voluntary registration threshold is R120,000 (up from R50,000). (sars.gov.za)
- Section 20A ring-fencing of assessed losses: for years of assessment beginning 1 March 2026, losses from trades may be ring-fenced using a marginal rate of 39% instead of only under maximum rate of 45%. (sars.gov.za)
Mauritius
- Personal income tax rate structure updated from 1 July 2025–30 June 2026: first Rs 500,000 chargeable income taxed at 0%, next band at 10%, remainder at 20%. (mra.mu)
- Fair Share Contribution: individuals with income exceeding Rs 12 million must pay an additional 15% contribution. Valid for 3 income years up to 30 June 2028. (mra.mu)
Choosing an Entity: Private Company, LLC, or Sole Proprietorship?
| Entity Type | South Africa | Mauritius |
|---|---|---|
| Private company | Corporate Income Tax (28%); can carry forward losses (within ring-fencing rules). Good for scale & foreign clients. | |
| Sole proprietor/freelancer | Subject to individual progressive tax; small operations might now escape VAT if revenue < R2.3 million. | |
| Branch/company in Mauritius | Attractive for low tax and treaty use—if you establish substance (bank account, local director, real operations) beyond just registration. |
Impact of VAT & Turnover-Tax Changes (South Africa)
- SMEs now need to assess whether their annual taxable supplies exceed the new thresholds (R2.3 million) to know if VAT registration is compulsory. Non-registration when required can trigger penalties and back payments. (sars.gov.za)
- Those under threshold may still opt for voluntary VAT registration if they wish to claim input credits or operate across borders. Be sure to understand administrative and compliance costs. |
Example: Choosing Structure Post-Changes
Scenario: A digital marketing freelancer earns R2 million/year, has some foreign-client contracts, charges South African clients, travels abroad regularly.
- Under new rules, does not need to register for VAT (not compulsory) since revenue < R2.3 million—but may voluntarily register to claim credits if buying goods/services incurring VAT.
- As a sole proprietor, taxed at individual rate bands. Setting up a company may help if planning significant expenses and looking to ramp up revenue.
- For foreign operations or clients, consider Mauritius establishment—but must maintain actual operations (office, staff) to benefit from treaty and substance rules.
Action Steps for SME Founders & Freelancers
- Run projections to determine if revenue will exceed new thresholds—plan entity structure accordingly.
- Assess input deduction opportunities and whether voluntary VAT registration makes sense.
- Establish formal substance for cross-border entity setups to avoid tax risk. Use local professionals.
- Monitor policy updates, especially ring-fencing rules, VAT practice notes (e.g. withdrawing of VAT Practice Note 7 for passenger transport in SA effective 1 Jan 2027). (sars.gov.za)
Bottom line: Post-2026 in SA and Mauritius, smaller businesses have new windows—threshold hikes, new tax bands, ring-fencing changes—make entity setup and tax regime choices more impactful than ever.