Ramaphosa Signs Sweeping New Laws with Immediate Nationwide Implications

The Global Minimum Tax Act which requires large multinational enterprises (MNEs) operating in the nation to pay a global minimum corporate tax rate of 15% was formally signed into law by South Africa in a historic move intended to prevent tax evasion and ensure fair taxation for multinational corporations.

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting created the GloBE (Global Anti-Base Erosion) Rules which are adopted by the law. South Africa is one of the approximately 138 nations and jurisdictions that agreed to apply the GloBE regulations which are exemplified by the Global Minimum Tax Act.

The establishment of a Top-up Tax on the earnings of MNE groupings that fall under the purview of the Act and have a global turnover of more than €750 million is at its core. This implies that if an MNE’s global effective rate is less than 15% then they may still be subject to the Top-up Tax even if their operations in South Africa have a low effective tax rate. 

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The “Domestic Constituent Entities” South African branches or subsidiaries of multinational enterprises are the primary focus of the Act. If the MNE’s worldwide effective tax rate drops below the internationally agreed minimum then these entities are held jointly responsible for paying the Top-up Tax. “Domestic Joint Ventures” or joint ventures based in South Africa are subject to similar rules.