VAT rate increase blocked; SCA reshapes expropriation compensation review standard

The Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2026 (Act 3 of 2026), assented to on 31 March 2026, prevents the announced VAT rate increase from 15% to 15.5% (deemed effective 1 May 2025). It raises the transfer duty 0% bracket from R1.1 million to R1.21 million (deemed effective 1 April 2025), increases Employment Tax Incentive monthly amounts from R2 000 to R2 500 and the qualifying remuneration ceiling from R6 500 to R7 500 per month (deemed 1 April 2025), extends the s 13quat urban development zone allowance by five years to 31 March 2030, increases the carbon tax fuel levy from 0.69 to 0.99 cents per litre (deemed 1 January 2025), and updates excise duty rates on alcohol and tobacco products (deemed 12 March 2025). Normal tax rates are fixed for years of assessment commencing on or after 1 March 2025 (individuals and trusts) or ending on or after 1 April 2025 (companies).

NAD Property Income Fund owned land expropriated by SANRAL for road construction. The property had potential use as a community shopping centre. The High Court determined compensation but failed to apply the two-stage approach mandated by Du Toit, treated the s 25(3) just-and-equitable determination as a true discretion, and held that the risk of expropriation constituted a legal bar to potential use value.

The court held: The SCA upheld the appeal, holding that: (1) the s 25(3) determination is NOT a true discretion but an objective constitutional standard, reviewable on appeal on a correctness basis rather than the deferential standard applicable to true discretions; (2) the Du Toit two-stage approach is binding — courts must first determine compensation under s 12(1) of the Expropriation Act, then assess whether that amount satisfies s 25(3); (3) risk of expropriation does not constitute a legal impediment that ousts potential use value, but must be reflected in the hypothetical willing-buyer-willing-seller negotiation price; and (4) actual market sales data are salient evidence that must be properly considered. The matter was remitted to the High Court for further evidence and argument. The cross-appeal against punitive costs orders was dismissed.

Legal impact: This judgment materially changes the appellate review standard for expropriation compensation: courts of appeal may now intervene on a correctness basis rather than showing the lower court exercised its discretion unreasonably. It reinforces the mandatory Du Toit two-stage methodology and clarifies that risk factors (including the risk of expropriation itself) must be priced into the hypothetical negotiation rather than treated as binary legal bars to potential use value. Property owners and their valuers gain stronger grounds to argue for potential use value, while expropriating authorities can no longer rely on expropriation risk as a complete answer to higher-value claims.