Tax in South Africa can be applicable to worldwide income. This South African tax guide explains the South African tax system and tax rates, as well as how to file your South African tax return and VAT in South Africa.
If you work in South Africa or own a business, you will be obliged to pay tax, although the amount of South African tax you pay is dependent on certain factors, most importantly whether you are classed as a resident or non-resident taxpayer.
This guide explains the South African tax system and when foreigners are obliged to pay South Africa tax to the South African Revenue Service (SARS). It also explains essential information on how to file your South African tax return and South African tax rates.
Who has to pay tax in South Africa?
South Africa operates on a residency-based taxation system, meaning that tax residents (whether permanent or temporary) pay tax in South Africa on their worldwide income. Official residents include those with South African citizenship or a residence permit, but you are also considered a resident for tax purposes if you have lived in South Africa for more than 91 days in each of the last five tax years, and at least 915 days in total across those five years.
However, recent changes to South African tax laws now mean that all homeowners in the country, even non-resident, must also register with SARS in the event they are liable to pay capital gains tax on immovable property.
If you qualify as a tax resident in South Africa, you will need to register as a taxpayer by visiting your local SARS branch to verify your identity, address and bank details, or an employee may arrange this for you. The remainder of the process can be done online.
Those classified as non-resident taxpayers who do not meet the requirements above are liable to pay tax only on income earned inside South Africa.
In addition to direct taxation, there are also indirect taxes in South Africa, such as Value Added Tax (VAT) and Fuel Duty, which everyone has to pay, as well as contributions towards social security in South Africa. More information on South African tax legislation explaining who has to pay is available from the South African Revenue Service.
South African tax system for foreigners
For expats relocating to South Africa, there are a number of countries that have tax treaties with South Africa, including Australia, Japan, Sweden, Thailand, the United Kingdom, and the United States to avoid being subject to double taxation in your home country.
There is no tax on international 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 18% tax on lump sum payments above ZAR 500,000.
Filing your South African tax return
Residents who pay taxes in South Africa have to fill in an annual tax return form and submit to SARS. The only exemptions from this are those earning under R350,000 gross salary from a single employer, with no additional sources of income and no deductions they want to claim.
The South African tax year runs from 1 March to 28/29 February. The tax season, when people are required to submit their tax return forms, is from July to November.
Taxpayers, both individuals and businesses, are required to make the necessary payments along with their South African tax return. This will be any amount owed that hasn’t been paid through the Pay-as-You-Earn (PAYE) system, where your tax contributions are automatically deducted from your wages.
If you have to pay more South African tax, payments can be made to SARS using any of the following methods:
- at a bank;
- via a SARS eFiling; or
- via an electronic funds transfer.
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.
Provisional tax in South Africa
Provisional tax in South Africa is a system that requires taxpayers to pay at least two advanced amounts of South African tax throughout the year of assessment, based on estimated taxable income. The final payment will be payable following submission of your South African tax return.
All companies are liable to pay provisional tax, along with individuals receiving income other than PAYE salaries.
VAT in South Africa
Value Added Tax or VAT in South Africa is an indirect tax on the consumption of goods and services in the economy. The VAT rate in South Africa is currently 15% on the supply of most goods and services (with some exemptions) and on imported goods.
Businesses must register for VAT in South Africa if their annual turnover exceeds R1,000,000 but they can also register voluntarily if they wish. Businesses are responsible for paying VAT to the government but they can pass on this charge to their customers or clients by adding VAT to the cost of invoiced goods and services.
South African tax rates
Under the South African tax system, taxpayers are liable to individual taxes, taxes on assets and wealth, and corporate taxes if applicable.
South African income tax
This is the main form of tax in South Africa for individuals. Income tax in South Africa is payable on any earnings received from the following sources:
- employment income including salaries, bonuses, overtime and taxable benefits and allowances (in most cases, deducted from wage payments by employers through PAYE);
- profits or losses from a business or self-employed trade;
- director’s fees;
- rental income;
- investment income such as interest or dividends;
- pension income (excluding foreign pensions);
- certain capital gains.
Read Expatica’s guide to income tax in South Africa for details on income tax rates, thresholds and allowances in South Africa.
Capital gains tax
Capital gains tax is not a separate tax in South Africa but forms a part of income tax that’s applicable to both individuals and companies. Thus, any profit made when an asset is sold it is subject to the same rates as South African income tax.
Dividends tax is imposed on dividends payments to shareholders. The South African tax rate for this is 20%. This is a separate tax that is withheld from the dividend payment by the company making the payment, so is not something that needs to be accounted for nor paid by the payment recipient.
South African tax rates for property and wealth
Estate duty tax rates
Estate duty is the name given to inheritance tax in South Africa, which is a property tax payable on all estates with a net worth in excess of R3,500,000. The tax rate in South Africa for estate duty is 20% of the value above the threshold.
Those who retire to South Africa will be liable to pay estate duty on property, wherever it is situated, in the event of their death; although properties located outside of South Africa are exempt if they were acquired prior to residency or were inherited from or donated by someone who is not a South African resident.
Property located within South Africa is subject to the same estate duty whether it is owned by a South African national or a foreigner. The South African government has agreements to avoid double death duties with Botswana, Lesotho, Swaziland, Sweden, the United Kingdom, the United States, and Zimbabwe.
Read Expatica’s guide to wills, inheritance tax and law of succession in South Africa for more information.
Donations tax rates
Donations tax is a South African property tax payable on the value of any property disposed of as a donation. This is a flat tax rate in South Africa currently set at 20% of the donated property value and is payable by the donor. It needs to be paid by the end of the month following the month in which the donation was made. If payment is not made within the set period, then both donor and donee become jointly liable.
A donation is exempt if the total yearly value of donations does not exceed R100,000 for individuals (R10,000 for businesses).
Transfer duty is another property tax in South Africa, payable on any property acquired in a sales transaction. The South African tax rates for transfer duty are progressive, with all property valued below R900,000 exempt, rising to a maximum payment of R933,000 on property valued over R10,000,000, plus 13% of the value exceeding R10,000,000.
Transfer duty is payable by the person acquiring the property and should be paid within six months from the date of acquisition to avoid incurring interest.
Company taxes in South Africa
Corporate income tax
Corporate tax in South Africa, also known as business tax, is a tax payable on business income for all businesses and companies registered in South Africa. This includes:
- listed and unlisted public companies;
- private companies;
- close corporations;
- collective investment schemes;
- small businesses;
- share block companies;
- body corporates;
- public benefit companies;
- dormant companies.
Turnover tax in South Africa is an alternate, simplified method of taxation for small businesses with an annual turnover of R1,000,000 or less. It replaces income tax, capital gains, dividends tax and VAT in South Africa, although there is an option to remain in the VAT system.
The turnover tax rates in South Africa are progressive, ranging from zero tax paid on annual turnover below R335,000, up to a payment of R6,650 on turnover above R750,000 plus 3% of the amount above R750,000.
Skills Development Levy (SDL)
SDL is a tax in South Africa payable by employers to promote learning and development of employees in South Africa. Employers become liable for SDL if their total annual salary bill is more than R500,000.
SDL is charged to employers at a rate of 1% of the total salary bill. It is paid monthly by employers to SARS and the money is used for the skills development of employees.
Unemployment Insurance Fund (UIF)
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% of the employee’s salary (1% from the employer and 1% from the employee). It is the employer’s responsibility to pay this out of employee salaries each month to SARS.
Read Expatica’s guide to corporate taxes in South Africa for information on business tax rates in South Africa.
Indirect South African tax rates
Customs duties are taxed on imported goods with the aim of raising revenue and protecting the local market. This is an indirect tax paid in addition to VAT, and usually calculated as a percentage of the value of goods. However, certain food, drink, textile, and firearms products may be taxed according to volume.
Excise duties and levies
Excise duties and levies are imposed on high-volume daily consumable products (e.g., petroleum, alcohol, tobacco), as well as some non-essential and luxury items (e.g., electronic equipment, cosmetics). In addition to raising revenue, this indirect tax in South Africa exists to discourage consumption of products considered harmful to health or the environment. The rates of these taxes in South Africa vary from product to product.
The fuel tax is an indirect tax in South Africa paid on petrol and diesel fuels. This tax can vary, but it is currently around 37–38%.
Air passenger tax
The air passenger tax is another indirect tax in South Africa on international flights, currently levied at the rate of R190 per passenger (R100 for flights to Botswana, Lesotho, Namibia, and Swaziland). The tax is paid by the airlines who pass the cost on to the customers through flight fees.
South African tax rates on industry
Securities transfer tax
Securities transfer tax is a tax in South Africa levied on every transfer of either: a share or depository receipt in a company; or a member’s interest in a close corporation. The South African tax rate for this is 0.25%.
When listed securities are transferred through or from a member or participant, the member or participant is liable for the tax payment. The transfer of any other listed security will result in the person to whom the security is being transferred being liable. With unlisted securities, the company that issued the security is liable for the payment. Payments need to be made within a month of the transfer for listed securities and within two months for unlisted securities.
Withholding tax on interest or royalties
These are two taxes in South Africa charged on interest or royalties paid to or for the benefit of a foreign person outside South Africa. The South African tax rate for this is 15%. The foreign person is liable for the tax but it must be withheld by the person making the payment. There are certain exemptions, however.
Diamond exports levy
The diamond exports levy is an export tax in South Africa introduced in 2008 to all dealers and producers exporting diamonds from the country. The South African tax rate on diamond exports is 5%.
International oil pollution levy
The international oil pollution levy is is a tax in South Africa payable by those receiving crude or heavy fuel oil in excess of 150,000 metric tonnes per annum in South Africa. Taxes depend on amounts of oil received.
Mineral and petroleum resource
A tax in South Africa payable by those mining for or extracting resources from South Africa. Current mineral and petroleum resource tax rates in South Africa are up to 5% for refined mineral resources and up to 7% for unrefined mineral resources.