Taxation in South Africa
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Taxation in South Africa
Do I need to pay tax in South Africa?
You are counted as a South African resident if you live there for more than 183 days a year. South African residents are taxed on world-wide income - however certain types of income are exempt, and credits are calculated for tax already paid in another country. The UK has a double-taxation treaty with South Africa - so you avoid paying tax twice.
0 - 140,000 18% of every R1
140,001 - 221,000 25,200 + 25% of the amount over 140,000
221,001 - 305,000 45,450 + 30% of the amount over 221,000
305,001 - 431,000 70,650 + 35% of the amount over 305,000
431,001 - 552, 00 114,750 + 38% of the amount over 431,000
552,001 and above 160,730 + 40% of the amount over 552,000
Trusts are taxed at 40 %. The rates also vary for mining companies, oil/gas companies, insurance companies, and non-resident companies.
28% for companies and 33% for branches.
What do I have to do to register for tax in South Africa?
First of all you will have to decide what sort of 'structure' your business is:
- Sole Proprietorship; this is a business owned and operated by one person. All income from the business should be included in your individual tax return. There is unlimited liability.
- Partnership; a business run / owned by two or more people. This is not a separate legal entity, so each partner is taxed on their share of the profits. You can't have more than 20 partners. There is unlimited liability.
- Close corporation - this is similar to a company. It is a separate legal entity, and it must register as a taxpayer. Members don't have shares, but a percentage interest. The maximum number of members is 10. There is no share capital so there are no shareholders. The members are usually family etc.
- Private Company - this is a separate legal entity, therefore it must register as a taxpayer. The owners are shareholders, and the maximum number of shareholders is 50. There is limited liability for shareholders.
- There also exist; Small Business Corporations, Personal Service Companies, Personal Service Trusts, Labour Brokers, and Independent Contractors.
The tax year is the first of March until the end of February.
Individuals pay tax twice a year. They pay a provisional payment at the end of August (based on earnings in previous years), and the final payment at the end of February.
Companies have three payments; the payments at the end of August and February, but they can also have a third 'topping up' payment which is voluntary. This is paid within six months of the end of the year, and the aim is to avoid a large end of tax-year payment.
What sort of registrations will I have to complete for tax?
New businesses must file with South African Revenue Services (SARS) for; provisional income tax, value added tax (VAT), and employees tax (SITE or PAYE). Once you have registered as a Company or a Close Corporation with the Registrar of Companies or Close Corporations, SARS will be notified and your business is automatically registered as a provisional taxpayer and issued a registration number. You must also appoint a public officer, within one month of starting business, to represent you in dealings with the revenue authorities.
What's an income tax number?
This is a number given to you by SARS to identify you when it comes to dealing with tax etc.
If you're a company you will be automatically applying for this at the same time as you register your company
Otherwise as soon as you start a business, you must register with your local SARS office to get an income tax number. This must be done within 60 days. The IT77 form can be obtained from a SARS office or from its website
VAT (value added tax) is a tax of 14% added to the price of goods and services (there are some exceptions such as some basic foods).
Businesses with annual turnover/supplies of more than R150,000 must register for VAT. If you have a turnover of less than this, you can register voluntarily.
Some things (such as financial services) are exempt from VAT and some things are zero-rated (such as exports, sale of a business as a going concern). You must register;
Either at the end of any month where supplies in the preceding 12 month period were more than R150 000. Or, at the start of any month in which you think that the value of supplies in the coming 12 months might be more than R150 000. The registration form is available from SARS and is the VAT101.
Vat returns are usually completed every two months. There are two different methods of accounting for VAT returns:
The invoice basis - where the supply of goods and services are accounted for on a invoice basis
The payments basis - if your business isn't incorporated and it earns less than R2.5 million per annum you may apply to account for vat on a payments basis - you calculate vat based on the period in which supplies are paid for
All businesses with employees must register as employers and account for employees' tax; SITE (Standard Income Tax on Employees) and PAYE (Pay as You Earn).
If an employee earns R60,000 or less (after talking off pension/retirement deductions), then only SITE is payable. These employees do not need to render an annual tax return. If it is more than R60 000, both SITE and PAYE are applicable and the employee must render an annual tax return (SITE and PAYE taken off income are credited against the tax assessed).
Employers must register with the local SARS office (form IRP101). They must register with 14 days of becoming an employer. They must then pay the SITE and PAYE deducted to SARS, and this is done monthly.
For further information on taxes in and the tax system in South Africa, contact the South African Revenue Service (SARS).
Organisations that can assist with Taxation
Sovereign offers a range of advisory and support services to assist companies of all sizes to establish successful business operations in foreign markets.