Executive summary

The South African Revenue Service (SARS) on 30 April 2026 published draft subordinate legislation under sections 76C, 76D, 76I(b), 76J(1), 76J(3) and 76P of the Income Tax Act, No. 58 of 1962 (Income Tax Act), applicable to double taxation agreement (DTA) — i.e., bilateral — advance pricing agreements (APAs). The draft notices address a range of operational matters, including eligibility to apply for APAs, applicable fees, pre-application consultation processes, prescribed application content, amendment and withdrawal procedures, rejection criteria, processing and finalization of APAs, ongoing compliance reporting obligations and record-keeping requirements, as well as the Commissioner's ability to issue further procedural guidance.

Consistent with the Explanatory Note, SARS has confirmed that the program will commence as a pilot, limited in scope and access, reflecting current resource constraints and a cautious, phased implementation approach. Public comments are invited by 29 May 2026.

Background

The APA framework was introduced into the Income Tax Act by the Tax Administration Laws Amendment Act, 2023, with the stated objective of increasing tax certainty for large-scale cross-border transactions with transfer pricing implications, while aligning with international developments and SARS' strategic focus on certainty and voluntary compliance.

The Explanatory Note confirms that, following preparatory work and stakeholder consultation over recent years, SARS now considers itself ready to operationalize the program on a pilot basis through subordinate legislation, initially restricting the program to bilateral APAs concluded under applicable tax treaties.

Key features of the APA pilot framework

Eligibility and transaction scope

Eligibility is limited to persons with turnover exceeding 50 billion South African rand (ZAR50b) (approximately US$3b) in the year of assessment immediately preceding the year in which a pre-application consultation is requested and transactions involving distribution, manufacturing or imported intragroup services. The draft notices refer to turnover of a "person" and do not expressly clarify whether this threshold is to be assessed on a standalone legal-entity basis or by reference to group-level turnover, which may require further clarification in finalized guidance.

Transactions involving financial assistance or the creation of intangibles are excluded. Materiality thresholds of ZAR1b (approximately US$60m) apply for manufacturing and distribution transactions or ZAR300m (approximately US$18m) for imported intragroup services. SARS retains discretion to accept or reject applications.

Fees

The pilot introduces a cost-recovery fee structure including a ZAR100,000 (approximately US$6,000) nonrefundable pre-application fee, a ZAR1m (approximately US$60,000) application processing fee and a ZAR100,000 (approximately US$6,000) annual maintenance fee once an APA is concluded.

Processing and rejection

The draft notices set out formalized procedures for pre-application consultations, application processing, competent authority negotiations and extensive information requirements. SARS may reject applications on specified substantive and procedural grounds.

Practical implications

Given the eligibility thresholds, fee structure and discretionary acceptance criteria, the APA pilot is expected to be relevant primarily to a small cohort of very large multinational groups. As a result, existing transfer pricing compliance and dispute resolution processes are likely to continue to be the predominant mechanisms applied by taxpayers outside the scope of the pilot.

For taxpayers within scope, the APA pilot presents a strategic opportunity to obtain prospective certainty in respect of complex and high-value cross-border transactions. However, the level of documentation, upfront engagement and cost-recovery fees required suggest that only taxpayers with well-developed transfer pricing governance frameworks are likely to be able to participate effectively

For taxpayers currently outside the scope of the pilot, the draft framework nevertheless provides important insight into SARS' evolving transfer pricing expectations, particularly in relation to economic substance, documentation standards and alignment of profits with underlying activity. These taxpayers may wish to reassess their existing transfer pricing policies and documentation in light of these developments.

Next steps

Taxpayers, including those potentially excluded from the initial pilot, may consider providing comments to SARS on aspects of the draft framework that could impact access or implementation. Areas in which further clarification may be helpful include:

• Whether the turnover threshold applies on a standalone or group-wide basis
• Interpretation and application of SARS' discretion to accept or reject applications
• Scope limitations on eligible transactions
• Practical operation of information-sharing and competent authority processes

SARS has invited public comment on the draft notices by 29 May 2026.

Affected entities should contact knowledgeable tax advisors with any queries, requests for assistance and more information regarding submitting public comments and potentially participating in the pilot program.