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Income Tax in South Africa

Find out about taxation on income in South Africa. Information on who qualifies for resident and non-resident taxation, as well as standard income tax rate guidelines...

Tax is based on a residence system which means all residents, irrespective of where their income comes from, must pay tax. Some exemptions do apply for certain types of income and credit is given for paying foreign taxes. Non South African residents are taxed only on their South African income. A resident for tax purposes is someone who lives and works in South Africa for more than 183 days a year.

Income tax is levied on all income and profits received by a taxpayer, this includes individuals and companies. South African residents are taxed on their world-wide income. The tax year begins on 1 March and ends on 28/9 February. Tax is calculated based on earnings. Employee’s tax is due at the end of the tax year but a system has been devised whereby tax is payable in portions: SITE, PAYE and provisional tax.

All first-time tax payers, which refers to any new employee earning an income, irrespective of their salary, need to register with the South African Revenue Service (SARS) as a tax payer.

For details from the South African Revenue Service on how to register: Click here

Completing a tax return

Everyone who is working has to complete a tax return unless their total pay, including bonuses, is less than R120,000 a year and:

  • Their total remuneration is from a single employer
  • Remuneration is for a full year (based on the tax assessment year)
  • No allowances were paid, from which PAYE was not deducted in full, with regards to travel allowance

The final income tax payable is calculated based on the total income for that assessment year, which is normally calculated at the end of the year assessment. Tax returns are sent out annually to registered tax payers and must be completed and returned to SARS.

Employee’s tax

SITE and PAYE both form parts of the employee tax which is deducted directly from employee’s wages by employers. Employees are given a receipt of the amount which is paid directly to SARS by employers.

Standard Income Tax on Employees (SITE) is not a separate tax but a different way of paying tax for those employees who earn less than a certain amount. This is currently for individuals who earn less than R120,000 a year.

Pay As You Earn (PAYE) ensures that an employee’s income tax liability is paid on a continual basis ats the same time that income is earned.  For those earning less than R74,000 PAYE is the only tax payment required. There are also deductions available for many low wage earners under this scheme.

Provisional tax is for taxpayers who wish to pay income tax during the tax year in which the income is earned, thereby spreading the load of income tax payment. Provisional taxpayers pay their final tax liability in two instalments during the course of the tax year. The first is due within six months of the assessment period which is based on previous earning and the second due at the end of the assessment period. Exemptions do apply.

Penalties apply for late payment of provisional tax. If the full amount has not been paid in the two instalments a final bill will be issued and this should be paid within seven months of the end of the assessment year. Interest is payable on the shortfall. However, if more tax is paid than owed a refund is given with interest, although this is at a lower rate than that charged for late payment.
Income tax returns are available annually after the end of each year of assessment and must be completed and returned to SARS each year. Provisional tax estimates and payments are made on IRP6 forms.

  • For more information about provisional tax: Click here

 

Disclaimer: Tax law is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of South African tax law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.

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