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Tax Guide South Africa

Tax Guide South Africa

Personal Income Taxation in South Africa

Personal Income Tax is charged in South Africa on aggregate income. This implies that both, income sourced within South Africa, as well as income sourced outside South Africa is used for calculating personal income tax. Foreign credit, however, is granted in South Africa for taxes that are paid. On the contrary, non-residents in South Africa are only supposed to pay Personal Income Taxes on income that has been earned within the periphery of South Africa.

Personal Income Tax rates in South Africa

South Africa follows a progressive tax regime. Similar rates of taxation are levied on both, residents, as well as non-residents. The following income tax rates are levied in South Africa:

  • For an income between 0 ZAR (South African Rand) and 216,200 ZAR (South African Rand): Basic tax for this income threshold is 0 ZAR. However, tax on excess (greater than 0 ZAR) is applied at a rate of 18%.
  • For an income between 216,201 ZAR (South African Rand) and 337,800 ZAR (South African Rand): Basic tax for this income threshold is 38,916 ZAR. However, tax on excess is applied at a rate of 26%.
  • For an income between 337,801 ZAR (South African Rand) and 467,500 ZAR (South African Rand): Basic tax for this income threshold is 70,532 ZAR. However, tax on excess is applied at a rate of 31%.
  • For an income between 467,501 ZAR (South African Rand) and 613,600 ZAR (South African Rand): Basic tax for this income threshold is 110,739 ZAR. However, tax on excess is applied at a rate of 36%.
  • For an income between 613,601 ZAR (South African Rand) and 782,200 ZAR (South African Rand): Basic tax for this income threshold is 163,335 ZAR. However, tax on excess is applied at a rate of 39%.
  • For an income between 782,201 ZAR (South African Rand) and 1,656,600 ZAR (South African Rand): Basic tax for this income threshold is 229,089 ZAR. However, tax on excess is applied at a rate of 41%.
  • For an income between 1,656,601 ZAR (South African Rand) and higher: Basic tax for this income threshold is 587,593 ZAR. However, tax on excess is applied at a rate of 45%.

Corporate Income Taxation in South Africa

For business entities that are regarded as residents in South Africa, CIT is payable on the worldwide income. This is not dependent on the source of income of these business entities. However, all non-resident companies are supposed to pay tax on income that has been sourced from within South Africa, or has been earned resulting from South African resources.

Corporate Income Tax Rates in South Africa

For both resident, as well as non-resident companies in South Africa, the applicable tax rate is fixed at a flat rate of 28%. However, this rate has subsequently been reduced to 27% from 1st April 2022.

Small businesses in South Africa are defined as businesses that do not have a gross income of more than 20 million ZAR. On the other hand, as far as small business corporations are concerned, they are taxed at the different rates as compared to larger corporations. The applicable tax rates for smaller companies are as follows:

  • For the first ZAR 87,300 of taxable income: Tax is levied at a rate of 0%.
  • For a taxable income ranging between ZAR 87,300 and ZAR 365,000: CIT is levied at a rate of 7% of the taxable income.
  • For a taxable income ranging between ZAR 365,000 and ZAR 550,000: CIT is levied at a rate of 21% of the taxable income.
  • For a taxable income ranging between higher than ZAR 550,000: CIT is levied at a rate of 28% of the taxable income.

Alternative Turnover Tax for Small Companies

In order to reduce the compliance related costs for small companies, there is a turnover-based presumptive tax in place. Under this regime, companies that have a turnover of less than ZAR 1 Million (annually) have the discretion to pay this particular tax instead of normal Corporate Income Tax. This levy varies from 0% to 3%. This is purely contingent on the level of turnover.

Dividend Tax

Dividend Tax is levied in South Africa at a rate of 20%. This is paid by both, resident companies, as well as non-resident companies.

Other Taxation in South Africa

  • Value Added Tax: VAT is levied as an indirect consumption tax. It is imposed across all goods and services consumed at a zero rate. The rate is levy is 15%. However, there are some goods and services that are zero rated. They are mostly goods that are regarded as basic necessities, like food staples.
  • Custom Duties: Custom Duties are charged in South Africa for all imported goods and services, at rates varying from 3% to 45%.
  • Excise Duties: Excise Duties are also levied at ad valorem rates on luxury goods, both imported, as well as locally produced.
  • Transfer Duties: Transfer duties are in place when it comes to fixed and fluctuating income rates, between 0% and 13%.
  • Securities Transfer Tax: Securities Transfer Tax (STT) is imposed at 0.25%. This is levied on the transfer of security.
  • Payroll Taxes: Payroll Taxes are withheld from the gross pay of the employee, contingent on the actual amount of remuneration.
  • Skills Development Levy: Skill Development Levy is imposed at a rate of 1% of the total payroll expenses of the company.

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