You may be liable to pay South African income tax as an expat. This guide covers the South African income tax system, income taxes in South Africa, deadlines, allowances, and income tax calculators for South Africa.
All residents living and working in South Africa are typically liable to pay income tax in South Africa, although how much income tax you must pay depends on your tax residency status and how much you earned.
This detailed guide covers the main aspects of individual income tax in South Africa, with sections including topics such as:
- Income tax in South Africa
- Earnings subject to income tax in South Africa
- How to file your tax return in South Africa
- Income tax rates in South Africa
- Calculating income tax
- Income tax in South Africa for foreigners
- Tax refunds in South Africa
- Fines in South Africa
- Income tax advice in South Africa
- Useful resources
Income tax in South Africa
The income tax system in South Africa
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. Taxes only apply to the South African income of non-residents, however.
The South African Revenue Service (SARS) collects income tax in South Africa. This revenue partly contributes to public goods such as public healthcare. In most cases, though, people pay taxes through the Pay As You Earn (PAYE) system. Under this system, taxes are withheld through your monthly salary payments and reconciled at the end of the tax year.
Taxpayers who receive income beyond a monthly salary may also be liable to pay provisional taxes.
Who pays income tax in South Africa?
South Africa operates on a residency-based taxation system, meaning that residents are taxed on worldwide income and non-residents are taxed on South African-sourced income. 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
- have lived at least 915 days in total in South Africa across those five years
SARS collects tax in South Africa. Working residents must obtain an income tax number and submit an annual South African tax return.
Who is exempt from income tax in South Africa?
Generally, if you earn less than R79,000 annually (or less than R122,300 if you’re older than 65), you don’t have to pay income tax. Additionally, you don’t need to file a return if all of the following are true:
- Your total employment income for the year was less than R500,000
- Your employment income was from only one employer for the full tax year
- You have no other form of income (e.g., rental income, another job, car allowance)
- You aren’t claiming any other tax deductions, like medical or travel expenses
If you meet all of the criteria above, you don’t need to submit a tax return. If you’re still not sure if you need to, check out this link.
Earnings subject to income tax in South Africa
Taxes on income and salary in South Africa
Income tax in South Africa includes individual and business income tax. You can also learn more about business or corporate income tax in South Africa in our guide to these taxes.
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
- 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 is a separate tax that is withheld from the dividend payment by the company making the payment.
Taxes on savings and investments
As an individual taxpayer, any interest you earn on bonds or savings will be taxed. However, there is an annual allowance that isn’t taxed; you only pay tax on interest accrued beyond this amount. In 2020, the allowance is R23,800 and R34,500 if you’re 65 and older.
Taxes on rental income
If you receive income from a rental property, you should declare this on your income tax. Though taxes apply to this income, be sure to declare your expenses; taxpayers can deduct certain expenses such as agent fees, some insurance, and advertising. You can also check out this link for more information.
How to file your tax return in South Africa
If you wprl in South Africa, your employer deducts your SARS income tax contributions from your salary, but you will still need to complete an annual South African income tax return.
You must register as a South African taxpayer and have a SARS income tax number. Your employer typically does this; 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 must also register for eFiling.
Provisional tax return
If you receive an income other than an employment salary, you 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. You 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.
Income tax deadlines in South Africa
The current South African tax year runs from 1 March, 2019 to 29 February, 2020. The tax season, when people are required to file their income tax returns, is July to November 2020, depending on the method of tax filing. The 2020 tax deadlines, when announced, can be found here.
Income tax forms in South Africa
The South African income tax return for individuals is called form ITR12. To complete the 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
For a prototype of the ITR12 form, check out this link.
Income tax rates in 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 in brackets South Africa for 2020 (1 March 2019 – 29 February 2020) 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 – R1,500,000: 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 different income thresholds for certain age groups, up to which earnings are exempt from SARS income tax on. These are currently:
- R79,000: for those under 65 years;
- R122,300: for those aged 65–74 years;
- R136,750: for those aged 75 years and over
Personal tax allowance and deductions in South Africa
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 R79,000 (R122,300 for those aged 65–74 and R136,750 for those aged 75 and over)
- Medical tax credit of R310 per month (plus R310 per month for the first dependent and R209 per month for each additional dependent)
- 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
Self-employed income tax allowances in South Africa
Self-employed people are subject to income tax at the same levels as employees but there are a few deductions you may be able to claim, for example, certain home office expenses. For information that’s more specific to your work and financial situation, you should hire a tax specialist.
Calculating income tax
Using an income tax calculator will help you calculate the amount of South African income tax you have to pay. In fact, there are a number of income tax calculators online, including those from:
In place of using a SARS income tax calculator, you can also work it out using the following simple steps:
- 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).
- Deduct any forms of exempt income as detailed in Section 10 of the 1962 Income Tax Act South Africa.
- Deduct all allowances and deductions to calculate you your taxable income.
- Multiply your taxable income by your tax rate, depending on your tax bracket.
- Subtract any rebates owed: the annual rebate plus any rebates from over-payments 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 also be found on the SARS website.
Income tax in South Africa for expats
Foreign residents pay the same income tax in South Africa as local citizens. However, taxes for non-resident taxpayers only apply on income from South Africa and not worldwide.
South Africa has tax treaties with Australia, Japan, Sweden, Thailand, the United Kingdom, and the United States, amongst others. 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.
Tax on pensions
For both South African residents and non-residents, there is no tax on overseas pensions in South Africa. However, those retiring in South Africa who are receiving a South African pension will be liable to pay tax on annual earnings above R122,300, and at least the minimum 18% tax on lump-sum payments above R500,000.
More information about taxes and retirement in South Africa is available from the South African Revenue Service.
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!
Tax refunds in South Africa
Because of the PAYE system in place throughout South Africa, it’s not as common as in other places to receive a bulky tax refund annually. Instead, what usually happens is that your income tax is withheld with every paycheck and at the end of the year, when the amounts are reconciled, if you have overpaid or underpaid, you’ll deal with it then.
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 is available from the South African Revenue Service.
Fines in South Africa
Not filing your tax return can result in a penalty ranging from R250 to R16,000 for each month that you don’t comply. For the most up to date information about tax return penalties, check out the SARS website.
Income tax advice in South Africa
As someone living and earning in a country that’s not home, it’s very important to seek expert advice for many different facets of your new life, but especially when it comes to your taxes. There is simply too much room for error for you to go it alone and this only becomes truer if you have a complicating situation, such as self-employment or property ownership. Get appropriate financial advice to avoid potential future problems.
- South African Revenue Service (SARS)
- SARS income tax tool
- Tax deductions in South Africa
- SARS holds free tax workshops at most of their branches 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.