2026 Draft Taxation Laws Amendment Bill – Carbon Tax and Incentives Update

The 2026 draft Taxation Laws Amendment Bill (“DTLAB”) has been released for public comment, with comments due by close of business on 26 August 2026. The draft TLAB proposes amendments to the Carbon Tax and selected tax incentives. As your trusted partner, we have summarised the key proposals to help you understand and prepare for these proposed changes.

Carbon Tax:

• IPCC Code 1A4a Threshold

The DTLAB proposes changing the carbon tax eligibility threshold for standby generators registered under IPCC code 1A4a Commercial/Institutional from 10 MW to 25 000 tCO₂e, effective 1 January 2026. This follows public comments to National Treasury noting that the reporting and compliance burden for this code is significantly higher than the related carbon tax liability for companies in this sector. Once the Taxation Laws Amendment Act is published, companies registered with SARS for carbon tax under IPCC code 1A4a will need to update their licensing details or deregister their licences before the upcoming carbon tax season.

• Refund Mechanism for Carbon Budget Compliance

The carbon budget refund rules proposed in the 2025 Taxation Laws Amendment Bill have been clarified to address uncertainty. The proposed amendments to section 17A of the Carbon Tax Act specify that companies may claim a refund in year 3 for the first two tax periods, and again in year 6 for the third to fifth tax periods or for the full five-year period where cumulative emissions are less than or equal to the allocated carbon budget. These amendments will take effect on a future date to be determined by the Minister of Finance.

• Customs and Excise Act Amendment

To support the revised carbon budget refund mechanism, the Customs and Excise Act will be amended to allow carbon budget-related refunds to be claimed beyond the current two-year prescription period, in line with section 17A of the Carbon Tax Act. This will accommodate the longer five-year carbon budget cycle.

Tax Incentives:

• Renewable Energy Infrastructure for Mining Operations

An amendment is proposed to Section 36 of the Income Tax Act, 1962 to allow expenditure on roads and fencing associated with qualifying renewable energy projects under section 12U to be included in the capital expenditure of a mine, improving the overall tax treatment of the renewable energy investment.

• Investment Incentives

There are no proposed changes to existing investment incentives. Businesses should therefore view the 2026 Draft TLAB as largely maintaining the existing incentive framework while providing additional support for carbon mitigation initiatives.

If you would like to discuss how these developments may impact your business, please contact us.

Christo Engelbrecht

christo@catalystsolutions.global

+27 84 513 8177