Tax in South Africa can be applicable to worldwide income. This South African tax guide explains the country’s tax system and rates, as well as how to file your South African tax return and pay VAT.
This guide explains the various aspects of taxes in South Africa, including the following:
- The tax system in South Africa
- Federal taxes in South Africa
- Taxes on goods and services (VAT) in South Africa
- Who has to pay tax in South Africa?
- South African tax system for foreigners
- Income tax rates in South Africa
- Tax on property and wealth in South Africa
- Inheritance tax in South Africa
- Company taxes and VAT rates in South Africa
- Import and export taxes in South Africa
- Tax advice in South Africa
A residency-based taxation system is in operation in South Africa, with permanent and temporary residents taxed on worldwide income.
18.2 million of South Africa’s 57 million population registered to pay income tax in 2018. The treasury estimates that 1.9 million residents are responsible for 80% of income tax receipts. Gauteng province is home to 40% of South African taxpayers and accounts for 45% of overall tax receipts.
In February 2019, the South African government announced it was freezing income tax brackets. This brought criticism from some quarters over residents being pushed into higher tax bands by annual salary increases.
Tax changes for South African expats
New tax collection rules could affect more than a million South African expats living abroad.
Currently, foreign income is exempt from South African income tax if the citizen spends more than 183 days abroad (subject to 60 of these days being consecutive).
This rule was introduced to prevent double taxation, but the South African government believes it offers an unfair advantage to citizens who have moved to tax havens or countries with which it doesn’t share tax treaties.
From March 2020, a tax-free threshold of R1 million will be introduced, with earnings above this taxable at a rate of up to 45%.
Experts believe South African citizens in England and France won’t be significantly worse off, due to the similar tax scales in operation in these countries. Residents of the likes of the United Arab Emirates, however, could face higher bills.
The South African government levies a series of direct taxes on citizens and companies operating in South Africa. These include income and business taxes, capital gains and inheritance taxes.
Indirect taxes such as Value Added Tax (VAT) and Fuel Duty also apply, as well as contributions towards social security in South Africa.
More information on who has to pay is available from the South African Revenue Service.
VAT in South Africa is levied on the consumption of goods and services.
The VAT rate in South Africa is currently 15% on most goods and services and on imported goods, though there are some exceptions.
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.
Businesses must register for VAT in South Africa if their annual turnover exceeds R1 million.
Can you get a refund on VAT in South Africa?
Tourists and diplomats visiting South Africa can claim a refund of the VAT they paid on goods purchased in the country.
To qualify, you’ll need to be a non-resident foreign passport holder or a South African passport holder who is now a permanent resident of another country.
You can reclaim VAT when leaving the country by declaring the goods in question to a customs official.
The South African government’s guide to VAT refunds for tourists offers further information on how to claim.
Permanent and temporary residents of South Africa are eligible for income tax, so if you have citizenship or a residence permit you’ll need to pay tax.
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.
All homeowners in South Africa, even those classed as non-residents, must register with the SARS in the event they are liable to pay capital gains tax on 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. The remainder of the process can be done online.
Foreign residents pay the same income tax in South Africa as local citizens. However, those classed as non-resident taxpayers are only taxed on income earned in South Africa and not worldwide.
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, which can help you to avoid 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.
South Africa is signed up to the Automatic Exchange of Information (AEOI) system, a new global standard which aims to crack down on cross-border tax evasion.
Earnings received from employment income, self-employed trade, rental income, investment income and pension income are subject to income tax.
Self-employed people are subject to income tax at the same levels as employees in South Africa.
South Africa’s income tax bands for the 2020 tax year are as follows:
- Up to R195,850: 18% of taxable income
- R195,851–R305,850: 26% (R35,253 plus 26% of taxable income above R195,850)
- R305,851–R423,300: 31% (R63,853 plus 31% of taxable income above R305,850)
- R423,301–R555,600: 36% (R100,263 plus 36% of taxable income above R423,300)
- R555,601–R708,310: 39% (R147,891 plus 39% of taxable income above R555,600)
- R708,311+: 41% (R207,448 plus 41% of taxable income above R708,310)
- R1,500,001+: 45% (R532,041 plus 45% of taxable income above R1,500,000)
There are a number of online income tax calculators where you can work out how much you’ll need to pay , including those from:
Read Expatica’s guide to income tax in South Africa for details on income tax rates, thresholds and allowances in South Africa.
How to file your income tax return in South Africa
Residents who pay taxes in South Africa have to fill in an annual tax return form and submit to SARS.
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.
Individuals and businesses taxpayers 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 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!
Capital gains tax
Capital gains tax is not a separate tax in South Africa but instead forms a part of income tax.
Thus, any profit made when an asset is sold it is subject to the same rates as South African income tax.
Donations tax is a South African property tax payable on the value of any property disposed of as a donation.
This is set at 20% of the 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.
A donation is exempt if the total yearly value of donations does not exceed R100,000 for individuals (R10,000 for businesses).
Any property acquired in a sales transaction is subject to transfer duty.
The South African tax rates for transfer duty are progressive. Property valued below R900,000 is 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.
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.
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.
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.
Corporate income tax
Corporate tax is 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.
Corporate tax in South Africa is charged at a flat rate of 28% for all companies. You can learn more about taxes for business work in our guide on company tax in South Africa.
Turnover tax in South Africa is an alternate, simplified method of taxation for small businesses with an annual turnover of R1 million 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.
Dividends tax is imposed on dividends payments to shareholders. The 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.
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.
Securities transfer tax
Securities transfer tax is levied at 0.25% on every transfer of either a share or depository receipt in a company, or a member’s interest in a close corporation.
Withholding tax on interest or royalties
These are two taxes 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 payable by those receiving crude or heavy fuel oil in excess of 150,000 metric tonnes per annum. 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.
Customs duties are taxed on imported goods with the aim of raising revenue and protecting the local market. This tax is paid in addition to VAT, and is usually calculated as a percentage of the value of goods.
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 tax in exists to discourage consumption of products considered harmful to the environment.
The rates of these taxes in South Africa vary from product to product.
The fuel tax is levied 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).
Airlines pay this tax and pass the cost on to the customers through flight fees.
Taxes can be complicated, especially when you’ve moved to a new country and need to get your head around the system.
The good news is that it’s possible to get professional help. If you’re filing your taxes in South Africa for the first time, it can be a smart move to employ an accountant.
Likewise, you should consider taking independent financial advice on your business tax liabilities if you’re setting up a company in South Africa.