For self-employed workers and business owners, this guides explains company tax in South Africa, including company tax rates and dividend taxes.
If you are self-employed or a business owner, you will be liable to pay company tax in South Africa. How much business tax you pay and what deductions you can claim will depend on the size and type of your business in South Africa.
This guide explains the essentials of company tax in South Africa includes:
- Who pays company tax in South Africa?
- Types of business tax in South Africa
- Company taxes in South Africa for employees
- Company tax rate in South Africa
- Small business tax in South Africa
- Self-employment, freelancers, sole traders and partnerships
- Company taxes for specific businesses
- Deadlines for paying corporate tax in South Africa
- Business tax allowances and deductions in South Africa
- Foreign business owners
- How to file a South African business tax return
- Corporate tax contacts
Corporate, business or company tax in South Africa is payable by all registered businesses in the country to the South Africa Revenue Services (SARS). South African-based businesses will be liable to pay South African corporate tax on their worldwide income. Companies that are based outside South Africa but operate in the country or have a branch there will pay tax on income derived from within South Africa only.
The type of companies that have to pay corporate tax in South Africa include:
- listed and unlisted public companies
- private companies
- close corporations
- collective investment schemes
- small business corporations
- share block companies
- body corporates
- public benefit companies
- dormant companies
Read an overview on tax in South Africa
Corporate income tax
This is the standard tax on income for all registered companies in South Africa. Read more about income tax in South Africa.
Turnover tax in South Africa
Turnover tax is an alternate, simplified method of business tax in South Africa. It is a tax for small business in South Africa with an annual turnover of ZAR 1 million or less. It replaces corporate income tax, VAT, capital gains and dividends tax in South Africa, although there is an option to remain in the VAT system.
The rates of turnover tax in South Africa are progressive, ranging from zero tax paid on annual turnover below ZAR 335,000, up to a payment of ZAR 6,650 on turnover above ZAR 750,000, plus 3 percent of any amount above ZAR 750,000.
Dividend tax in South Africa
Dividend tax in South Africa is imposed on dividends payments to shareholders at a rate of 15 percent. It is a tax levied on the payee but withheld by the company making the payment, so if your company has shareholders who receive dividends payments, you will be responsible for deducting tax from the payment and submitting it to SARS.
Value Added Tax (VAT) in South Africa
VAT is an indirect tay payable by some companies in South Africa. The VAT rate in South Africa is currently 14 percent on the supply of most goods and services (with some exemptions) and on imported goods.
Businesses must register for VAT if their annual turnover exceeds ZAR 1 million but they can also register voluntarily if they wish.
If your company in South Africa has employees, you will have to administrate the following taxes.
Pay-as-you-earn (PAYE) for employees
This is an individual income tax on the salary of employees, taxed at a progressive rate dependant on the employee salary, but has to be withheld by the employer. If you have employees, you will need to arrange their PAYE contributions and make the regular payments to SARS. For information about income tax rates and tax deductions for employees, read Expatica’s guide to income tax in South Africa.
Unemployment Insurance Fund (UIF)
The UIF is an unemployment benefit fund payable to those who have been in employment for at least 24 hours per week if they become unemployed, sick or take maternity leave. It is a short-term contributions-based benefit and is funded through contributions of 2 percent of the employee’s salary (1 percent from the employer and 1 percent from the employee).
Skills Development Levy (SDL)
SDL is a tax in South Africa payable by employers to promote the learning and development of employees in South Africa. Employers become liable for SDL if their total annual salary bill is more than ZAR 500,000. It is charged to employers at a rate of 1 percent of the total salary bill
The corporate tax rate in South Africa is a flat rate of 28 percent for all companies. This is slightly above the average corporate tax rate for Africa overall, which is 27.46 percent, and above the global average of 23.62 percent. Trusts in South Africa pay tax at a separate rate of 41 percent.
If you run a small business in South Africa, you have a number of options on how to register your business, which will affect how you pay business tax in South Africa. If you run the business yourself, you may wish to operate as a self-employed sole trader. But if you wish to register the company as a separate legal taxpaying entity, you have the following options.
Register as a standard private company
This will mean that the company will be responsible for paying corporate tax in South Africa at the standard rate. You can also register as a Close Corporation (CC) or a Cooperative but will still pay corporate tax in South Africa at the standard rate.
Register as a micro-business for Turnover Tax
If you qualify for turnover tax, you can take this option to simplify the tax process for your business. This is an alternative to paying company tax in South Africa.
Register as a Small Business Corporation (SBC)
If you want to pay tax for small businesses in South Africa, you can register as an SBC if your annual turnover does not exceed R20 million, as well as meeting other criteria detailed on the SARS website. SBCs are taxed at a lower rate of corporate tax in South Africa than other companies.
These tax rates are as follows:
- No tax on annual income of less than ZAR 75,000
- 7 percent tax on income between ZAR 75,001 and ZAR 365,000
- 21 percent tax on income between ZAR 365,001 and ZAR 550,000
- 28 percent tax on income above ZAR 550,000
If you qualify as a self-employed or freelance worker in South Africa, or if your business trades as a sole proprietorship or a partnership (or unincorporated joint venture), then you will taxed as an individual and will have to submit a personal income tax return (ITR12) rather than a business tax return in South Africa.
Partnerships can be between two or more people. Each partner will be taxed as an individual on their share of the partnership profits. Read how to file your tax return in our guide to income tax in South Africa.
Gold mining and long-term insurance companies
Companies dealing in gold mining or life insurance are taxed at a special company tax rate in South Africa. Gold mining companies are taxed based on a standard formula. Life insurance funds are taxed at rates of between 0 and 30 percent depending on the fund type.
Non-profit and Public Benefit Organisations
Organisations operating as not-for-profit or as a public benefit organisation are exempt from paying corporate tax in South Africa. More information is available in the SARS website.
To pay business tax in South Africa, you must first register your business or yourself as a taxpayer. Similar to personal income tax, your business tax return in South Africa will be assessed by SARS.
For businesses, you are required to submit an annual tax return between July and November for the previous tax year. You are also required to submit two provisional tax returns – one in the first half of the year, and the second by the end of the year – containing estimates of income earned for the current tax year.
All companies have to pay their taxes using the provisional tax system. This is completed in three installments. The first two payments are based on estimates and are made at six monthly intervals during the tax year. The final payment is made along with the final annual tax return, consisting of the balance owed for that tax year.
Company tax in South Africa can be paid in the following ways:
- online banking
- electronic funds transfer
- bank payments
- swift payment method (available only to foreign payments)
According to the South African tax law, the following charges can be deducted from taxable income as allowable business expenses:
- Business expenses: all outgoings that are incurred as part of running the business, including material and equipment costs, employee costs, administration costs, business rental costs, office supplies, travel, uniforms, wholesale purchase costs for goods resold, financial charges, utilities, legal fees, marketing and promotion.
- Capital expenses: such as capital equipment, machinery, renovation costs.
- Start-up expenses: expenditure incurred for business purposes in the period before the commencement of the first year of trade, provided these are expenses that would have qualified as deductible business expenses within the general operation of the business.
- Net operating losses: any losses carried forward from previous years.
In addition to these, the following credits and incentives are available for companies paying corporate tax in South Africa:
- Foreign tax credit: for South African residents, any taxes paid on foreign-sourced income can be claimed back as a tax credit, provided this income has been included on the tax return. Some countries have a tax treaty with South Africa to prevent ‘double taxation’.
- Research and development (R&D): R&D costs within South Africa are 150 percent deductible, subject to government approval.
- Headquarter (HQ) company regime: certain exemptions and benefits offered to companies using South Africa as a HQ location, subject to certain company requirements.
- Industrial policy projects: an incentive for manufacturing businesses (excluding those dealing in alcohol, tobacco, arms and biofuels) participating in energy-efficient projects. Tax allowances include up to 55 pecent of the cost of any manufacturing asset used in the project (not exceeding ZAR 900 million) along with a training allowance.
- Special Economic Zones (SEZ): for businesses operating in any of the country’s SEZs, there is a reduced corporate tax rate of 15 percent along with a 10 percent allowance towards new/unused building costs and reduction of employees’ tax.
- Energy efficiency savings: a deduction equating to ZAR 0.95 for each kilowatt hour saved during the tax year.
- Venture capital companies: a tax incentive for investors in small and medium-sized businesses through venture capital.
If you are a foreign resident with a business based in South Africa, you will be liable to pay corporate tax in South Africa on its worldwide income. If you have a non-resident company – a company that has a branch or establishment in South Africa but is based elsewhere for tax purposes – then you will only pay company tax in South Africa on income earned inside the country. This tax will be paid at the standard rate of 28 percent (unless you register as an SBC or for turnover tax).
If you are an expat who qualifies as a tax resident in South Africa, your home country may have a tax treaty with South Africa. If not, then you may be able to claim foreign tax credits on taxes paid on foreign income. Read more about the South African tax system.
The business tax return form in South Africa is called the ITR14. You can file your company income tax return via eFiling or at a local SARS branch. You will need your Standard Industrial Classification (SIC) code when filing the business tax return form.
- South African Revenue Service website (SARS)
- Corporate income tax form ITR14 in South Africa
- Guide on how to complete the ITR14 business tax return
- An overview to tax in South Africa
- Income tax in South Africa
Filing US taxes from South Africa
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from South Africa, contact Taxes for Expats and see our Guide to taxes for American expats.
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