South Africa: Revised guidance on section 24C relating to timing mismatches of income and expense
Clarifying tax treatment of advance contract income when related expenditures fall into a subsequent year of assessment
The South African Revenue Service (SARS) in March 2026 issued a revised version of Interpretation Note 78 (IN 78), providing guidance on section 24C of the Income Tax Act 58 of 1962, which provides relief for timing mismatches in income and expenses under contracts.
Specifically, section 24C allows taxpayers an allowance for expenditures they are contractually obligated to incur in a subsequent year of assessment (YOA) when the following requirements are met:
- Income in a particular YOA includes or consists of an amount which is received by or accrues to the taxpayer under any contract
- Such income will be used in whole or in part to finance expenditure which will be incurred in a subsequent YOA in performing the obligations under such contract
- That expenditure must either be expenditure that will be allowed as a deduction once incurred or is expenditure that will be incurred on the acquisition of an asset for which a deduction will be allowed
The revisions to IN 78 reflect various legislative amendments and Constitutional Court decisions that have affected the interpretation of section 24C.
Read an April 2026 report prepared by the KPMG member firm in South Africa