Do you have to pay tax in South Africa? What are the different taxes applied? Find out all that you need to know in this article.
Tax will definitely be one of your main concerns when moving abroad, especially if you are planning to work or set up a business. South Africa has a comprehensive tax system including different types of taxes, namely income tax, corporate tax, value added tax, among others. In general, all forms of income are subject to tax, regardless of their source. However, South Africa has signed non double taxation agreements with several countries. So make sure to inquire whether your home country is one of these.
Good to know:
The tax year starts on March 1st to end on February 28.
Income tax applies at the following rates before the 7th of each month:
- < R 150,000 18 %
- R 150,001 – R 235,000 R 27,000 25 % of income exceeding R 150,000
- R 235,001 – R 325,000 R 48,250 30 % of income exceeding R 235,000
- R 325,001 – R455,000 R 75,250 35 % of income exceeding R 325,000
- R 455,001 – R 580,000 R 120,750 38 % of income exceeding R 455,000
- > R 580,000 R 168,250 40 % of income exceeding R 580,000
Good to know:
The minimum threshold of taxable net annual income is set at R 67,111 for less than 65 years old individuals, at R 106,111 for those aged between 65 and 74 years, and R 117,111 for more than 75 years old seniors.
As regards employees, income tax is deducted at source through the Pay as you earn (PAYE) system. At the end of the tax year, the employer shall issue a IRP5 certificate which must be annexed to your annual tax return. The self-employed and those receiving other types of income have to pay tax through two annual transfers based on an estimate and the income actually received respectively.
Corporate tax, also known as company income tax in South Africa, applies to all legal persons having a head office and management in the country and is considered as a residence. Company income tax applies at a rate of 30% and can be settled in two annual installments as in the case of income tax. Small businesses, for their part, are entitled to some allowances as per South African tax laws.
However, the South African tax law does not define a specific tax year for companies. Therefore, the tax year can differ from one company to another.
Capital income tax
Capital income tax is paid every year. The amount of interest accumulated during the tax year is determined by the bank or any other financial institution as determined by the company or individual, through a tax certificate. Similarly, rental income is taxable following deduction of certain expenses.
VAT and other taxes
Value added tax (VAT) applies at a rate of 14% on imported products. On the other hand, exported goods and services are exempt from VAT. Moreover, fuel tax applies at a rate of 30% on gasoline and diesel.
Tax registration is the responsibility of employers. In the case of companies, it takes place during the setting up.
Individuals who are not linked to any company in South Africa (work, management or other), have to register at the SARS on their own. They therefore have to fill a tax registration number form which they have to submit to the nearest tax office to their place of residence. Thereafter, they can perform eFiling on the SARS website.