The South Africa Tax System

The South African Revenue Service (SARS) manages South Africa’s tax system and operates progressively, meaning that the tax rate increases as the taxable amount increases.

How Tax Works in South Africa

Below is a clear overview of how the South Africa Tax System.

Personal Income Tax:

Personal income tax is the money you pay to the government from your salary or wages.

South African residents are taxed on their worldwide income, while non-residents are taxed only on income earned within South Africa.

The tax system is progressive, with rates ranging from 18% to 45% depending on the income bracket.

Individuals are entitled to rebates based on their age, including a primary rebate for all taxpayers and additional rebates for those aged 65 and above.

Corporate Income Tax:

The corporate tax rate in South Africa is 27% for companies.

Small Business Corporations (SBCs) can benefit from lower rates on a tiered basis.

Micro businesses with a turnover of less than R1 million can opt for turnover tax, a simplified tax system.

Value-Added Tax (VAT):

The VAT rate is 15%, applied to most goods and services.

Certain basic foodstuffs, exports, and other specific items are zero-rated.

Some financial services, educational services, and residential rent are exempt from VAT.

Capital Gains Tax (CGT):

Gains are taxed at an effective rate based on 40% of the gain being included in the individual’s taxable income.

The inclusion rate for companies is 80%, meaning 80% of the capital gain is taxed at the corporate rate.

A portion of the gain on the sale of a primary residence is exempt from CGT.

Dividend Tax:

A 20% tax is withheld on dividends paid to shareholders.

Certain entities, like South African companies and retirement funds, are exempt.

Estate Duty:

Estate duty is levied at 20% on the first R30 million of the estate and 25% on amounts exceeding R30 million.

There are exemptions, a primary rebate and deductions for bequests to a surviving spouse.

Donations Tax:

Donations tax is levied at 20% on the value of property donated, with a threshold of R100,000 per annum for individuals. Donations exceeding R30 million are taxed at 25%.

Customs and Excise Duties:

These are taxes imposed on goods imported into South Africa as well as on certain products like alcohol, tobacco, and petroleum products.

Fuel Levies:

These are specific taxes included in the price of fuel, used primarily for road maintenance and other related expenses.

Tax Administration:

Taxpayers must file annual tax returns, and there are deadlines for different categories of taxpayers (individuals, companies, etc.).

SARS imposes penalties and interest for late submissions, underpayments, and other forms of non-compliance.

SARS provides an online platform for taxpayers to file returns and make payments, making compliance easier.

Endeavour to always pay your tax.