Income tax South Africa

Calculating your income tax in South Africa

Comments0 comments

You may be liable to pay South African income tax as an expat. This guide covers the SARS income tax system, income tax brackets for South Africa, deadlines, allowances and income tax calculators for South Africa.

South Africa income tax is governed by the Income Tax Act South Africa and collected by the South African Revenue Service (SARS). All residents living and working in South Africa are typically liable to pay income tax in South Africa, although how much SARS income tax you must pay depends on your tax residency status and earning amount.

South African income tax is levied on residents' worldwide income, with appropriate relief to avoid double taxation for certain foreigners, plus exemptions and allowable deductions as per the Act. Non-residents, however, are only taxed on their income from South African sources.

This detailed guide covers the main aspects of individual income tax in South Africa, including who must pay South African income tax, income tax brackets, SARS income tax deadlines, income tax deductions and allowances, SARS income tax calculators and how to fill out your South African tax return.

Who has to pay income tax in South Africa?

South Africa operates on a residency-based taxation system, meaning that residents (whether permanent or temporary) pay tax on their worldwide incomes. Residents are those with citizenship or residence permits, but you are also considered a resident for tax purposes if you have been living in South Africa for more than 91 days in total in each of the last five tax years, or at least 915 days in total across those five years. Find out your tax residency status in South Africa in our guide to tax in South Africa.

Those classified as non-residents will pay South African income tax only on income earned inside the country.

Tax is collected by the South African Revenue Service (SARS) and working residents must obtain a SARS income tax number and submit an annual South African tax return.

Income tax South Africa

What earnings are subject to SARS income tax?

Income tax in South Africa includes individual and business income tax. Business or corporate income tax in South Africa is dealt with separately in our article here.

SARS income tax applies to the following type of earnings:

  • employment income including salaries, bonuses, overtime and taxable benefits and allowances (in most cases deducted from wage payments by employers through a pay-as-you-earn or PAYE scheme)
  • profits or losses from a business or self-employed trade
  • director's fees
  • rental income
  • investment income such as interest or dividends
  • annuities
  • royalties
  • pension income (excluding foreign pensions)
  • certain capital gains

There is also an additional dividends tax in South Africa imposed on dividends payments to shareholders at the rate of 20% (this increased from 15% in February 2017). This is a separate tax that is withheld from the dividend payment by the company making the payment.

Income tax brackets South Africa

Income tax brackets in South Africa are progressive like elsewhere, where you pay a higher income tax rate the more you earn.

The income tax brackets South Africa for 2018 (1 March 2017 – 28 February 2018) are listed below.

  • Up to R189,880: 18% of taxable income
  • R189,881–296,540: 26% (R34,178 plus 26% of taxable income above R189,880)
  • R296,541–410,460: 31% (R61,910 plus 31% of taxable income above R296,540)
  • R410,461–555,600: 36% (R97,225 plus 36% of taxable income above R410,460)
  • R555,601–708,310: 39% (R149,475 plus 39% of taxable income above R555,600)
  • R708,311+: 41% (R209,032 plus 41% of taxable income above R708,310)
  • R1,500,001m +: 45% (R533,625 plus 45% of taxable income above R1,500,000)

The are different income thresholds for certain age groups, up to which earnings are exempt from SARS income tax on. These are currently:

  • R75,000 for those under 65 years (rising to R75,750 in the 2018 tax year)
  • R116,150 for those aged 65–74 years (rising to R117,300 in the 2018 tax year)
  • R129,850 for those aged 75 years and over. (rising to R131,150 in the 2018 tax year)

Filing your South African income tax return

The South African tax year runs from 1 March to 28 February. The tax season, when people are required to file their income tax returns, is July to November. The deadlines for submitting income tax return forms in South Africa for the 2018 tax year are as follows:

  • 24 November 2018: at a SARS branch (provisional and non-provisional)
  • 24 November 2018: SARS eFiling (non-provisional)
  • 31 January 2019: provisional taxpayers via eFiling

If you are employed in South Africa, your employer will deduct your SARS income tax contributions from your salary, but you will still need to complete an annual South African income tax return. The only exemptions are for those earning under R350,000 gross salary from a single employer and who have no additional sources of income or deductions they want to claim. Read Expatica's guide on social security in South Africa to find which tax contributions are deducted from your salary.

Those receiving income other than employment salary are liable to pay their tax via the South African provisional tax system. This is done in order to spread the tax liability across the year. The taxpayer will pay two upfront installments during the year, based on estimated taxable income. The final balance owed will then be submitted along with the tax return form.

Those submitting a late South African income tax return or making a late payment will be liable for an admin penalty, which is outlined by the SARS income tax authority here.

South African income tax allowances and deductions

Certain forms of income are exempt from tax in South Africa. These are set out in Section 10 of the 1962 Income Tax Act South Africa.

Tax residents can make the following deductions from their taxable income in South Africa:

  • Tax threshold allowance of R75,000 (R116,150 for those aged 65–74 and R129,850 for those aged 75 and over).
  • Medical tax credit of R310 per month (plus R310 per month for the first dependant and R209 per month for each additional dependant).
  • Exemption on interest payments up to R23,800 (R34,500 for those aged 65 and over).
  • Tax relief on retirement lump sum benefits up to a total of R500,000 across a lifetime.
  • Tax relief claims against work-related travel and vehicle allowance.
  • A tax-free allowance for settling in costs up to one month's basic salary for relocation costs may be provided in some cases where an employee and his/her family are relocated to South Africa for employment purposes.

South African income tax for foreigners

Foreign residents pay the same income tax in South Africa as local citizens, however, those who classed as non-resident taxpayers are only taxed on income earned in South Africa, and not worldwide.

For both South African residents and non-residents, there is no tax on overseas pensions in South Africa. However, those retiring to South Africa who are receiving a South African pension will be liable to pay tax on annual earnings above R116,500, and at least the minimum 18% tax on lump sum payments above R500,000. Read more about taxes and retirement in South Africa here.

South Africa has tax treaties with Australia, Japan, UK, US, Thailand and Sweden. These have been set up to help ensure that individuals moving from one country to another don't have to pay 'double taxation' on income earned in their home country. Here is a list of countries that have tax treaties with South Africa. 

Income tax calculator South Africa

How to fill in a South African tax return

You will first need to be registered as a South African taxpayer and have a SARS income tax number. This will typically be done by your employer, otherwise, read how to join South African social security.

Once you have your SARS income tax number, you can complete your tax return on paper or online. You can obtain a paper copy of the form from your local SARS office. To complete a South African tax return online, you will need to register for eFiling which you can do here.

The South African income tax return for individuals is called form ITR12. To complete the ITR12 form, you will need:

  • your bank statements
  • information on all forms of income and allowances/deductions you are including in the form
  • your tax number
  • your employee tax certificate (IRP5/IT3a) if applicable
  • certificates (IT3b) for any investment income
  • medical aid certificate for details of contributions made that do not appear on your IRP5/IT3a certificate

Income tax calculators South Africa

Using an income tax calculator in South Africa will help you calculate the amount of South African income tax you have to pay. Doing an online search for 'SARS income tax calculator' turns up several webpages offering tools, not limited to:

In place of using a SARS income tax calculator, you can also work it out using the following simple steps:

  1. Determine gross income: calculate all forms of taxable income and any employment-related benefits and allowances (worldwide income for South African tax residents, or income earned inside South Africa only for non-residents).
  2. Deduct any forms of exempt income as detailed in Section 10 of the 1962 Income Tax Act South Africa.
  3. Deduct all allowances and deductions to calculate you your taxable income.
  4. Multiply your taxable income by your tax rate, depending on your tax bracket.
  5. Subtract any rebates owed: the annual rebate plus any rebates from overpayments in past years, or applicable rebates for foreign taxes allowed by double-taxation agreements

Once your ITR12 has been assessed by SARS, you will receive a Notice of Assessment (ITA34) that will detail any outstanding tax that needs to be paid. A guide on how to complete your ITR12 form can be found on the SARS website here.

Appealing your income tax assessment

If you are not happy with the income tax assessment made by SARS, you can appeal the decision by filing a dispute. Details on how to appeal a decision can be found on the SARS website.

South African income tax advice

  • South African Revenue Service (SARS) website.
  • SARS online tool helps you find out if you need to pay South African income tax.
  • List of tax deductions in South Africa.
  • SARS holds free tax workshops at most of their brances between January and March, where you can see advice on filing your South African income tax return.
  • UK government guide on South African income tax for expats.

It's important to be aware of potential scams asking for your personal information; SARS will never request your banking details in any form of communication, such as post, email or SMS. Only for the purpose of telephone calls and authentication purposes, SARS will ask for your personal details. Importantly, SARS never hyperlink to other websites online, even those of banks, so be aware if you are asked to leave SARS website if filing online.


Click to the top of our guide to South African income tax.

 

Expatica


Updated 2018.

Comment here on the article, or if you have a suggestion to improve this article, please click here.

If you believe any of the information on this page is incorrect or out-of-date, please let us know. Expatica makes every effort to ensure its articles are as comprehensive, accurate and up-to-date as possible, but we're also grateful for any help! (If you want to contact Expatica for any other reason, please follow the instructions on this website's contact page.)


Captcha Note: Characters are case sensitive
The details you provide on this page will not be used to send any unsolicited e-mail, and will not be sold to a third party. Privacy policy .

0 Comments To This Article