South Africa: Proposed amendment to repeal exemption for certain dividends recognized under IFRS
Amendment is proposed to apply for years of assessment commencing on or after January 1, 2026.
The government has proposed amending section 24JB of the Income Tax Act to repeal the exemption for dividends (including foreign dividends) received by covered persons on equity investments used as hedging instruments, measured at fair value through profit or loss (FVPL) under IFRS 9.
The amendment is proposed to apply for years of assessment commencing on or after January 1, 2026.
Background
Section 24JB was enacted to align the taxation of financial instruments for covered persons with their financial reporting under IFRS. Covered persons must generally include fair value changes and other amounts recognized under IFRS in respect of these financial instruments in their taxable income or loss.
IFRS 9 provides that dividends from equity instruments designated at FVPL or formally recognized under hedge accounting are typically recognized in profit or loss. However, section 24JB has until now excluded all dividends (including foreign dividends). The government has identified that certain covered persons invest in shares and receive exempt dividends to hedge financial liabilities (such as equity-linked notes) when payments are deductible for tax purposes, leading to tax mismatches.
Read an August 2025 report prepared by the KPMG member firm in South Africa