Types of Tax in South Africa

 

The South African tax system in South Africa has been subjected to a fair amount of public scrutiny in recent months due to various issues within the political framework of the country. It should also be noted that while the tax laws are applicable to all residents of South Africa, there is still a lot of confusion at a grassroots level about how it works. The following is a brief explanation of the types of tax applicable to South African residents and how they apply to certain persons:

 

Income tax

 

Income tax is imposed on a resident’s worldwide income, at the following rates:

 

Individuals and special trusts are taxed at graduated rates, up to a maximum of 40%, companies and corporations at 29%, and trusts and 40%.

 

Interest received by a non-resident is tax-exempt provided the individual is physically absent from South Africa for at least 183 days and does not carry on business in South Africa during the year of assessment. Interest received by or accrued to any company managed or controlled outside South Africa is tax-exempt unless such company carries on business in South Africa (such as branches of foreign companies). Dividends received by non-residents are tax-exempt. Royalties that are subject to Double Tax Agreements and paid to non-residents are subject to a final withholding tax of 12% (Residents require the approval of the Department of Trade and Industry and Exchange Control for payments of a royalty to a non-resident). Non-residents are taxed on South African source income.

 

Capital gains tax

 

Capital gains tax is imposed on a resident’s worldwide assets at the following maximum effective rates:

 

Individuals and special trusts at a rate of 10%, companies and corporations at 14.5% and trusts at 20%.

 

Generally, a primary residence up to a value of R1 million is excluded. The rate applicable to trusts may be reduced to that applicable to individuals by distributing capital gains to individual beneficiaries. Capital gains tax, triggered on disposal of an asset, applies to a non-resident’s immovable property or assets of a permanent establishment in South Africa.

 

Donations tax

 

Generally, donations tax is levied at a rate of 20% on the value of any property disposed gratuitously by a South African resident or domestic company or domestic corporation. Exemptions include donations by a natural person up to R30,000 per annum, property disposed of under and in pursuance of any trust, donations between spouses not separated, and donation of property or a right in property situated outside South Africa if acquired by the donor before becoming resident in South Africa for the first time, or by inheritance or donation from a non-resident.

 

Other

 

Estate duty is levied on estates at a rate of 20%. Exemptions include the first R1,500,000 of the estate and any bequest to a surviving spouse.

 

Secondary tax on companies and corporations is levied at a rate of 12.5% on dividends declared by a company or corporation.

 

 

By Wesley Geyer

Creative Writer at ATKA SA