South African property companies that rely on REIT tax treatment should review their financial reporting, ownership structures and distribution controls after SARS published new qualification requirements.

The requirements were published in Government Gazette 55221 on 19 August 2026. SARS added the notice to its 2026 income tax notices index on 13 October 2026. The rules apply to years of assessment beginning after the date of publication.

What the new requirements cover

The notice sets conditions for a company to fall within paragraph (b) of the definition of a REIT in section 1(1) of the Income Tax Act. It is aimed at qualifying property structures rather than ordinary small businesses, but it has important implications for companies, groups and advisers operating in the property sector.

Among other requirements, the company must be a wholly owned subsidiary of an eligible entity, such as an insurer, retirement fund, short-term insurer, qualifying state-owned company or REIT. At least 80% of the value of its assets must be directly attributable to immovable property or a qualifying property company.

The notice also requires at least 75% of revenue to be derived from rental income. Total liabilities may not exceed 60% of total assets, while gross assets must be at least R300 million. These tests are based on figures reflected in audited or reviewed annual financial statements prepared under IFRS or the Companies Act.

Why the accounting records matter

The requirements make the quality and classification of financial information central to the tax position. Property companies will need reliable records supporting asset values, rental income, liabilities, distributable profits and ownership relationships.

The distribution requirement is also significant. A qualifying company must distribute at least 75% of its total distributable profits to equity holders no later than six months after the end of the relevant year of assessment, subject to the Companies Act solvency and liquidity test.

This means the tax review cannot be separated from the year-end close, board approvals, dividend calculations and cash-flow planning. A company may appear to meet an income or asset test but still face difficulty if its supporting schedules are incomplete or its distribution process is not properly documented.

Governance is part of the compliance test

The company’s audit committee or a separate risk committee must oversee an appropriate risk-management policy. The policy must, at a minimum, follow industry practice and prohibit derivative transactions outside the normal course of the property company’s business.

The committee must also report annually that it monitored compliance with the policy and that the company complied in all material respects during the year.

What affected businesses should check

  • Confirm whether the ownership structure meets the wholly owned subsidiary requirement.
  • Reconcile asset values and property classifications to the latest annual financial statements.
  • Test rental income as a percentage of total revenue.
  • Review liabilities against the 60% leverage limit.
  • Document distributable profits, planned distributions and the solvency and liquidity assessment.
  • Check that the risk-management policy, committee oversight and annual reporting are up to date.

Property groups should map these requirements to their tax and financial reporting calendars now, rather than waiting for the next year-end. Where the classification or calculation is uncertain, management should obtain specialist advice and retain a clear evidence trail supporting the position taken.

For broader support with accounting, tax and compliance processes, businesses can explore Your Financial Partner’s services.