The New Normal for Foreign Tax Credits: Key Section 6quat Changes (South Africa)
South African taxpayers with foreign income or investments will benefit from crucial amendments to Section 6quat of the Income Tax Act, which provide greater relief against international double taxation. These changes, primarily focused on the carry-forward of unused credits and the treatment of foreign capital gains tax, are effective from March 1, 2025 (the start of the 2026 year of assessment for individuals).
Part 1: Detail of the Section 6quat Amendments
- Introduction of the Foreign Tax Credit Carry-Forward (Up to 6 Years)
This is the most significant change, moving away from the “use-it-or-lose-it” system:
| Aspect | Pre-March 1, 2025 | Post-March 1, 2025 |
| Treatment of Unused FTCs | Any foreign tax credit (FTC) that exceeded the South African tax liability for the year was generally lost. | Unused FTCs can be carried forward automatically by the South African Revenue Service (SARS). |
| Carry-Forward Period | Not applicable. | The unused credit can be carried forward for up to six subsequent years of assessment. |
| Applicability | Affects companies from the 2025 tax year and individuals/trusts from the 2026 tax year (commencing March 1, 2025). |
This amendment ensures that taxpayers will be able to fully utilize foreign taxes paid, even if South African taxes on that income are lower or if the income fluctuates between tax years.
- Full Utilisation of Credits on Foreign Capital Gains
The legislation has been modified to address the calculation of FTCs on foreign capital gains:
- The Change: Taxpayers are now permitted to fully utilise foreign tax credits for the taxes paid on capital gains in a foreign jurisdiction.
- The Benefit: This eliminates the previous restriction where the FTC for capital gains was limited only to the portion of the foreign tax credit attributable to the taxable portion of the gain (i.e., the portion included in South African taxable income).
This means the FTC can be used to the same extent for the taxes paid in South Africa on the same gains, providing fairer double tax relief.
Part 2: Compliance Steps for Taxpayers
The carry-forward mechanism is largely automated by SARS, but taxpayers must ensure correct disclosure and retention of records to benefit fully.
| Compliance Step | Action Required by Taxpayer | Rationale for Compliance |
| 1. Accurate Return Submission | Fully and accurately declare all foreign income and the corresponding foreign tax paid in the relevant section of the ITR12 (for individuals) or ITR14 (for companies) tax return. | SARS’s system relies on this input to correctly calculate the Section 6quat credit and the six-year carry-forward amount automatically. |
| 2. Documentation | Retain verifiable proof of foreign tax paid (e.g., foreign tax assessments, official tax receipts, or tax certificates). | In the event of a SARS verification or audit, this documentation is essential to prove the claim and prevent the disallowance of the credit. |
| 3. Assessment Review | Carefully review the Notice of Assessment (ITA34) received from SARS. | Ensure the correct FTC has been applied and that the unused foreign tax credit balance has been correctly carried forward and reflected on the assessment. |
| 4. Tax Residency Status | Verify current tax residency status in South Africa, especially for expatriates. | The entire Section 6quat mechanism only applies to South African tax residents taxed on their worldwide income. |
Final Note
These amendments, effective from March 1, 2025, significantly improve the South African tax system’s relief for double taxation, particularly for international investors and those with sporadic foreign capital gains. Taxpayers are encouraged to consult a tax professional for assistance with complex international tax matters.
Your Tax Deadlines for October 2025
- 07 October – Monthly Pay-As-You-Earn (PAYE) submissions and payments
- 20 October – End of Filing Season 2025 for Individual taxpayers
- 24 October – Value-Added Tax (VAT) manual submissions and payments
- 30 October – Excise Duty payments
- 31 October – VAT electronic submissions and payments and CIT Provisional Tax payments.
Adapt or Suffer: How to Keep Your Business Afloat in a Changing Climate
“Taking bold action on climate change simply makes good business sense. It’s also the right thing to do for people and the planet.” (Richard Branson)
Climate change impacts the fundamentals of business operations. Rising heat affects productivity, floods and storms damage infrastructure, droughts disrupt supply chains, and new regulations increase compliance costs. Many leaders still believe their sector will be spared, but no industry is truly insulated. Just as one-third of startups fail because they never properly defined their target market, businesses that fail to assess climate risks may find their models undermined by forces beyond their control. The message is clear: failing to future-proof your business, will result in extremely hard times ahead.
Start with the risks you’re facing
The first step is to identify which climate risks could most directly affect your operations. These can be physical (think floods, wildfires, and extreme temperatures), or transitional, such as regulatory changes and shifts in customer expectations.
According to the latest prediction models, South Africans can expect a hotter, more erratic climate with the country warming at about twice the global average. This means more very hot days that will hurt worker productivity and equipment reliability. On top of this, the country is also experiencing heavier downpours with increased flood damage. These damaging floods, such as those seen KwaZulu-Natal in April 2022 and the Western Cape in September 2023, will result in enormous insurance and economic losses and prolonged business disruption.
Despite the flooding, the country is also not in the clear when it comes to water stress. The 2015–2018 Cape Town “Day Zero” drought was devastating for car wash businesses but a boon for borehole drillers. Day Zero may have been avoided, but there will be more droughts in the future.
All of these issues can lead to stock and agriculture failures, infrastructure collapse and process interruptions. A lack of water, for example, creates cleaning and hygiene issues as well as lower staff productivity. Insurers in SA have been reporting increasing weather losses and rising catastrophe claims, which will continue to feed through to higher premiums and excesses and tougher underwriting in high-risk zones.
You can only build a realistic plan once you understand exactly where your exposures lie.
Build a climate profile for your business
Once you understand the risk categories, create a profile detailing how they intersect with your company. You need to consider your location, your sector, your suppliers and your employees. A warehouse on a floodplain carries different risks from a retail store in a heat-stressed city. Manufacturing firms may depend on inputs that are vulnerable to drought or fire, and employees may struggle in adverse weather conditions. Many exposures sit within the supply chain, where a small disruption upstream can ripple through global markets. For example, higher than usual temperatures may result in crops failing, or greater costs for HVAC and cold logistics services. Have you factored in these costs being passed on to your business?
This profile should be updated regularly, as conditions, regulations, and technologies evolve and more is learnt about the severity of future weather patterns.
Segment your strategy
Not every part of your business will need the same response. While operations may require investments in resilient infrastructure or more efficient energy use, supply chains might need diversification or tighter contracts with suppliers to ensure continuity.
Products and services may need to change as customers shift their preferences toward sustainable options. Segmenting your approach enables you to focus on the areas that matter most.
Use data to drive decisions
Climate planning is most effective when it’s based on evidence rather than assumptions. It is vital that any planning you do is based on the data from climate models, insurance assessments, and financial analyses. Tracking information like rising temperatures, energy costs, and new compliance regulations will turn climate risk from an abstract concern into a measurable factor in your strategy. In South Africa, municipal climate plans are being adjusted to redraw floodplain rules and heat-safety requirements. Is your business going to even be compliant when they come in?
Talk to your stakeholders
Your customers, employees, suppliers, and investors are able to offer different perspectives that could keep you ahead of any climate disasters. Customers can tell you what matters most in their purchasing decisions, employees may note practical changes to streamline daily operations and suppliers can share concerns that could highlight problems you had not foreseen. Talking to all of your stakeholders is more important than it’s ever been.
Climate planning is an ongoing process
Preparing for climate change is not something you can set and forget. It requires regular review and adjustment as risks, regulations, and technologies change. Businesses that take structured action now don’t just reduce their exposure – they’ll also become more attractive to capital investment and build long-term resilience.
Climate change is already reshaping the way companies operate. The question is no longer whether it will affect your business but whether you are ready to respond.
