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Master Personal Income Tax in South Africa: The Different Tax Types


Master Personal Income Tax in South Africa
Master Personal Income Tax in South Africa


Table of Content

What Is Income Tax?


Income tax is a type of tax that the government imposes on income generated by businesses and individuals within its jurisdiction. Income taxes are used to fund public services, pay government obligations, and provide goods to citizens.


South Africa has a resident-based tax system in which residents are taxed on their worldwide income and non-residents are taxed on their South African income. About 23.9 million of the 59 million residents in the country pay income tax, and most of this income comes from personal and corporate taxes.


The South African government collects a number of direct taxes from citizens and businesses doing business in South Africa. These include:

  • Income tax

  • Business tax

  • Capital gains

  • Inheritance tax.

In addition, there are indirect taxes such as value-added tax (VAT) and fuel tax, as well as contributions to South African social security.


Why Do We Pay Tax in South Africa?


The income tax you pay allows our government to meet the social and economic needs of our country and its people, and to ensure a better life for all.


Tax helps governments better deliver goods and services such as education, housing, and roads. The government provides public services such as police services and roads to the public. The government also pays the salaries of civil servants.


Citizens do not pay directly for these goods and services or for the time that civil servants spend on public service, but indirectly through taxes. Governments, therefore, need to make periodic decisions about how much to spend, what to spend, and how to finance spending. That's why we pay taxes. We all want better education, more police, better roads, and other government services all of which cost money.


Governments face constant demands to increase spending as people demand more goods and services from the government. These demands include free housing and free basic services such as electricity and water. Providing these services to the poor and funding them with taxes imposed by the rich leads to a massive redistribution of income from payers to beneficiaries.


Who Has To Pay Tax in South Africa?

Pay your Taxes in South Africa expert advise
South Africa's taxes

You will have to pay taxes in South Africa if:

  • You are a permanent or temporary resident of South Africa. If you have South African citizenship or a South African residence permit, you must pay taxes.

  • If you have resided in South Africa for at least 91 days in each of the last five tax years, for a total of at least 915 days, then you are legible to pay tax.

  • If you are a homeowner in South Africa. All homeowners (including non-residents) must register for SARS if they are subject to capital gains tax. Earn more than R1.25 million in foreign labor income as a taxpayer.

There are exceptions to these rules.


For example, if you are older or if your annual income is less than a certain amount. However, if you are eligible as a South African taxpayer, you will need to visit her local SARS office to register as a taxpayer and verify your identity, address, and bank details. The rest of the process can be completed online.


Personal Income Tax in South Africa


Income tax is levied in South Africa on income exceeding: R95 750 and under the age of 65. If you are between 65 and 75 years old, the tax threshold (i.e. the amount above which you are subject to income tax) is R148 217.

Here is a SARS Tax Brackets & Tax Tables for 2023-2024 that will show you the rates of tax for each income earned.


Income Tax For The Self-Employed in South Africa


Self-employed people are subject to the same income tax as employees in South Africa, but there are some deductions they can claim. Always consult a tax professional for more specific information regarding your professional and financial situation.


Value Added Tax (VAT)


VAT is applied on all goods and services at the standard VAT rate of 15%. However, certain items have a zero rating. Exports, gasoline, diesel, staple foods (whole grain bread, milk, fruit, etc.).

Some services are also exempt from his VAT, such as educational services, public transport and rental housing.


Capital gains tax


Capital gains tax occurs when an asset is disposed of (i.e. changes ownership). Examples include the sale of real estate or the acquisition of shares in a company.


Provisional tax


Businesses are automatically subject to the provisional tax system, but those who receive other income (rental income from real estate, interest income from capital investment, etc.) are provisional taxpayers.


Based on the estimated annual income, each year he will have three interim tax payments each. The first payment is made half a year later and the second at the end of the fiscal year. The third payment will be made 6 months after the end of the fiscal year.


PAYE (Pay As You Earn)


When a company hires an employee, taxes are deducted from the employee's salary. The advantage of this is that over 12 months he can pay off a year's tax liability instead of calculating it all at once.


Obligation To Transfer


Transfer tax is payable by an individual when acquiring real property at progressive marginal tax rates ranging from 0% to 13%. This type of tax must be paid within 6 months from the date of purchase.


Customs Duty And Excise Duty


Tariffs are imposed on imported goods to increase revenue and protect local markets. Excise duty and customs duties are levied on the following consumer goods:

  • oil

  • alcohol

  • tobacco products

Non-essential or luxury items (such as electronics or cosmetics). A secondary function of these tariffs and levies is to discourage the consumption of certain harmful products. H. Harmful to human health and the environment.


Donation Tax


Gift tax is payable on the gross amount of property disposed of directly or indirectly by a resident through gifts.

Did you know that the gift tax is levied at a flat rate of 20% on the value of the gifted property? Taxpayers can make tax-free contributions up to R100 000.00 per year. Such contributions must be made in cash or in kind.


Turnover Tax


Turnover Tax is a simplified tax regime only available to sole proprietorships, partnerships (the definition of partnership can be found here), corporations, or private entities with a 'qualified turnover' of less than R1 million per annum. These types of businesses are known as micro businesses.


A sales tax is a type of tax that is calculated based on a company's turnover, as opposed to a percentage of profits, i.e., income minus operating expenses, as in a normal business tax.

This difference eases the administrative burden for business owners by reducing the need to keep detailed records of expenses and understand which are tax deductible.

However, sales tax is not available to all businesses, and must meet SARS requirements to register.


Dividend tax


A dividend tax is a tax on beneficiaries. Shareholders of corporations in which dividends are paid and employees of closed corporations.

Dividend tax is withheld from dividend payments by the withholding agent if the company paying the dividend or a regulated intermediary is involved.

Dividends are payments made by a company to its shareholders or affiliates for the shares or members' interests held by that company or affiliate.


What Is Tax Deduction?


Taxes in South Africa
Are you eligible for a tax deduction?

A tax deduction is a reduction in taxable income that can ultimately reduce the amount of taxes owed to the state. In other words, a tax credit is an acceptable expense that can be deducted from a taxpayer's income, resulting in a reduction in taxable income and tax liability. Tax deductions help individuals and businesses reduce their tax burden and maintain more income. Common examples of tax deductions include mortgage interest, state and local taxes, medical expenses, rent, salaries, and business expenses such as utilities.


The Importance Of Paying Tax


Tax payments are not just for public goods and services. It is also an important part of the social contract between citizens and businesses. How taxes are collected and how they are spent determines the legitimacy of government.


What Happens if You Don't Pay Tax in South Africa


If you do not pay tax in South Africa you are subject to penalties. Administrative Actions (“Administrative Actions”) are penalties imposed under Section 210 of the Tax Administration Act (TAA). The TAA provides for different types of violations, subject to certain amounts of administrative penalties. Violations are subject to fixed penalties.


Personal Income tax


After December 1, 2022, if the individual has not filed an income tax return for her 2007 or later assessment year if this individual has one or more unpaid income tax returns.


Company (Corporate Income Tax)


For the year of assessment ending 2009 and any subsequent calendar year, if a company fails to file an income tax return in accordance with the Income Tax Act, penalties will be imposed if SARS issues a final demand to the company with reference to the notice. increase. There is a request to file a pending income tax return and the company has not filed the return within 21 business days from the date of the last request.


Top tip


Regardless of whether you are for or against administrative action, we encourage you to file pending tax returns to prevent further administrative action. Penalties recur monthly for unpaid returns for up to 35 months.


How To Identify Taxable Income


Your taxable income is your profit from your business less any tax deductions available to you as a sole proprietorship. Deductions available include pensions, non-profit organization (PBO) donations, and medical expenses.


What Are The Rates Of Tax in South Africa


There are different rates of tax for each taxable income. To make it easier for you here is a list of all the different types of rates of tax:

  1. Rates of Tax for Individuals

  2. Rates of tax for businesses

Conclusion


You now understand what income tax is and what taxable income is. The reasons why we pay tax have been highlighted. We understand that we all have the mandate to pay tax once we start earning. The key element of personal income tax has been given and a table of the tax year has been provided. We also outlined the tax for the self-employed. The different types of payable tax have been highlighted. Both direct and indirect taxes were given. The role tax deduction play has been outlined. Where the importance of paying tax has been given. Including complications that come with not paying taxes. Chat and Pay is only a few millstones from launching and we are excited to introduce the product to the market. Join our waitlist today and stand a chance to win amazing cash prizes.






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