Scrap new anti-investor tax changes: EasyEquities

Plans to abolish tax-neutral portfolio mergers could trigger capital gains tax, drive up costs and damage the growing actively managed ETF scene. 

Proposed changes in the 2025 Draft Taxation Laws Amendment Bill (TLAB) could have far-reaching consequences for South African investors and the broader investment industry. 

The amendments remove collective investment scheme (CIS) portfolios from the definition of a “company” in Section 41 of the Income Tax Act and delete CIS-specific provisions in Section 44, which currently allow for tax-neutral amalgamations between portfolios. The result is that investor-friendly restructurings – such as mergers of funds or conversions between unit trusts and exchange-traded funds (ETFs) – could now trigger capital gains tax for investors, even when the restructuring is approved by regulators to protect those very investors. 

These changes create an awkward regulatory duality that undermines investor outcomes. The financial sector conduct authority (FSCA)’s Treating Customers Fairly framework compels asset managers to act in investors’ best interests, yet the TLAB amendments penalise those same investor-protective actions by turning them into taxable events. Regulators are no longer aligned – and it’s investors who lose. 

The move also risks stifling growth and innovation in the collective investment space. South Africa’s unit trust industry is still structured around legacy rules. The ability to rationalise funds and migrate portfolios efficiently has helped managers create simpler, more cost-effective and more transparent products. Removing tax neutrality takes us in the opposite direction – it discourages modernisation and makes it harder to deliver global best practice to local investors. 

The FSCA itself has been encouraging the consolidation of smaller, sub-optimal funds to reduce costs and improve efficiency. The most effective way to achieve this is through portfolio amalgamations – yet SARS’s proposal effectively closes that door. The result will be higher costs, less efficient structures and a missed opportunity for innovative products like actively managed ETFs to deliver greater value for investors. 

At EasyETFs, we believe Treasury and SARS should preserve tax neutrality for bona fide CIS amalgamations approved under Section 99 of the Collective Investment Schemes Control Act (CISCA). A narrow, tightly controlled rollover provision – similar to those in the US and UK – would protect investors while closing potential avoidance loopholes. 

CIS amalgamations are supervised by the FSCA, require investor consent and are designed to avoid detriment. Tax should not be a penalty for doing the right thing. 

David Oberholzer, CFA, leads EasyETFs at Purple Group, expanding access to exchange-traded funds and actively managed investments. He combines deep industry knowledge with a passion for transparent, tech-enabled solutions. 

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