In this article we look at taxes affecting individuals with regard to what are your responsibilities concerning registration and payment. To understand the different types of taxes levied by SARS please review the article overview of the types of taxes
The South African tax system is based on your residence, meaning as a South African taxpayer, you taxed on your worldwide assets. This system has been in place since 2001 when South Africa changed from the “sourced based” system.
Income tax or normal tax.
This is most common category of tax paid by South Africans and includes PAYE, Provisional tax, Capital Gains tax and the Withholding of amounts of payments to non-resident sellers of immovable property.
PAYE (Pay as Your Earn) is the tax deducted by an employer from their employees on a monthly basis and then paid over to SARS. The employer is then obliged to issue an IRP5 certificate to each employee from whom they have deducted tax. This implies that all of these employees must have a tax number.
Employers are obliged to submit a reconciliation to SARS every 6 months to account for the PAYE that they have deducted from their employees and what they have paid over to SARS. This reconciliation can only be done if all employees from whom tax has been deducted actually have a tax number.
Currently the tax rebate allowed by SARS for every taxpayer is R15 714 (R24 327 if you are aged between 65 and 75 and R27 198 if you are over 75). A rebate is an amount that you can deduct from the tax that has been calculated on your earnings. This means that (as the lowest tax rate is 18%) a taxpayer will not pay tax on the first R87 300 (R87 300 x 18% = 15 714) of income they earn. This amount is known as the tax threshold. For people aged between 65 and 75 this threshold is R135 150 and if you over 75, R151 100.
SARS taxes individual taxpayers according to a table which has various tiers with the rate of tax increasing as the amount of taxable income increases. Owing to the tax rebate outlined above and the fact that taxable income is taxed in tiers (or bands) the actual rate of tax paid will always be less than the maximum rate of tax applicable to your earnings. The effective rate of tax you pay (i.e. across all of the tax tiers and after the tax rebate) is known as your marginal rate of tax. The tax table for the year ending February 2022 is as follows:
|Taxable Income||Rates of Taxation|
|R 0 – R 216 200||18% of each R1|
|R 216 201 – R 337 800||R 38 916 +||26% of the amount over R 216 200|
|R 337 801 – R 467 500||R 70 532 +||31% of the amount over R 337 800|
|R 467 501 – R 613 600||R110 739 +||36% of the amount over R 467 500|
|R 613 601 – R 782 200||R163 335 +||39% of the amount over R 613 600|
|R 782 201 – R1 656 600||R229 089 +||41% of the amount over R 782 200|
|R1 656 601 +||R587 593 +||45% of the amount over R1 656 600|
So, even if you are luckily enough to earn R1 656 600 your marginal rate of tax will be 35.46% i.e. the rate can never get to 45%
As explained above, PAYE is the tax deducted by your employer on your earnings. Should you earn any income that is not subject to PAYE then you are required to register as a Provisional Taxpayer or SARS would not be able to tax these amounts.
Provisional taxpayers are typically individuals who
- Earn rental income
- Interest or other investment income
- Own a business
- Are a Director of a company etc.
If you are obliged to register as a Provisional taxpayer then, even although you may also earn a salary, you will be considered to be a Provisional Taxpayer i.e. you cannot be registered as both a normal taxpayer and a provisional taxpayer.
An exception is that if you earn a salary and the other income you earn i.e. from rentals, interest etc is less than the tax threshold or the income from dividends, interest, rentals etc. is less that R30 000 you are excluded from being a provisional tax payer.
Capital Gains tax (CGT)
In October 2001 SARS introduced CGT which applies to a resident’s worldwide assets. While this type of tax was fairly common in other countries, South Africans were fortunate to avoid it until this date.
CGT is applicable to immovable property or assets of a permanent nature and is calculated as the difference between the proceeds when one of these assets is sold and the “base cost” (typically the purchase price). The base cost is only relevant to immovable assets sold that were acquired before October 2001. In these cases a formula, determined by SARS, needs to be used to calculate the deemed purchase as at October 2001.
SARS uses various provisions and rates to calculate an amount which must then be included in your taxable income and taxed as per the tax table detailed above (hence why CGT is included in the category or income tax (or normal tax).
All taxpayers are required to pay CGT should they have sold immovable property during the tax year.
SARS does; however, allow a taxpayer to deduct an amount of R40 000 each year from any capital gain that they may have realised in that year.
Withholding of amounts of payments to non-resident sellers of immovable property
This very particular tax was introduced as SARS had difficulties in collecting CGT from non-residents that sold immovable property in South Africa. To address this problem SARS introduced regulations requiring a purchaser who bought immovable property situated in South Africa from a non-South African resident to withhold 7.5% of the proceeds and pay this amount over to SARS.
Taxation of foreign entertainers and sportspersons
This is a tax on amounts received by foreign entertainers and sportspersons for activities occurring in South Africa. The tax is collected as a withholding tax (similar with the withholding tax above applicable to non-residents who sell property in South Africa).
This reason why this tax is included is that if a South African resident is involved in organising the event/s where foreign entertainers and sportspersons have earned revenue, it is the South African resident’s responsibility to withhold the applicable amount (15% of the proceeds) and pay it over to SARS. A failure to do so will result in punishment from SARS including imprisonment for up to 2 years!
Withholding tax on interest
Another withholding tax to make sure that SARS get what is due to it.
From 1 March 2015 interest payable to a non-resident is subject to a 15% withholding tax. Again, the onus, as far as SARS is concerned, is on the person/institution paying the interest to withhold the tax and pay it over to SARS.
Withholding tax on royalties
And yet another!
From 1 January 2015 a 15% withholding tax is applicable to all royalties paid to non-residents if the source of those royalties is in South African. The person/institution paying the royalty is responsible for withholding the tax and paying it over to SARS
To prevent people from avoiding having to pay tax on assets by donating them to others, SARS introduced Donations tax.
SARS defines a donation as a gratuitous disposal of property. If the person receiving the donation gives fair value in return, then it is not a donation.
Donations tax is levied at 20% for all donation up to R30 million and at 25% for all donations in excess of R30 million.
There are; however, 4 categories of exemptions that apply to donations tax
- Category 1 – donations between spouses or to a public benefit organisation attract no donations tax
- Category 2 – Companies and Trusts may make donations up to R10 000 per year without having to pay donations tax
- Category 3 – Individuals may donations up to R100 000 per year without having to pay donation tax
- Category 4 – bona fide contributions made towards the maintenance of any person.
Donation tax is payable by the end of month following the month in which the donation takes effect.
Shareholders who receive dividends from South African resident companies (or a non-South African company which is listed on a South African stock exchange) are taxed on the dividends they receive as the rate of 20%.
While the person receiving the dividend is responsible to paying the Dividends tax, under normal circumstances the dividends tax is withheld by a withholding agent and paid over to SARS.
Turnover tax on micro-businesses
If you have your own business either as a sole proprietor, a partnership or an incorporated business with a turnover of less than R1 million you may elect to pay turnover tax. Turnover tax is merely a simplified tax system in terms of which the taxpayer pays a specified rate of tax depending on the turnover (or revenue) of the business. The rates of turnover tax payable are as follows:
|Turnover||Rates of Tax|
|R 0 – R 335 000||Nil|
|R335 001 – R 500 000||1% of the amount over R335000|
|R500 000 – R 750 000||R1 650 +||2% of the amount over R500 000|
|R750001 – R1 000 000||R6 650 +||3% of the amount over R750 000|
Once the business earns more than R1 million the business no longer qualifies to pay Turnover Tax and will have to register for normal taxation.
Value Added Tax (VAT)
Unfortunately, we cannot escape the VAT levied on most goods and services that we purchase- 15%.
Any business/vendor that generates more than R1 million in a year is obliged to register for VAT. Once registered the business/vendor must charge VAT on all goods and services that they sell (except for a few items that are exempt in terms of the VAT Act).
Often people request an invoice with no VAT as they are not registered for VAT; however, this is not possible as the onus is on the registered business/vendor to charge VAT on all items sold.
To be a valid VAT invoice, the business’ VAT number must appear on the invoice and for all invoices in excess of R3 500 the purchaser’s VAT number is also required to be on the invoice if they wish to claim the VAT back from SARS.
The business/vendor who collects the VAT is obliged to pay it to SARS; however, they can elect to do this on a monthly or a bi-monthly basis.
Duties and levies
In the Overview of Taxes article, we listed a number of duties and levies which you may be subject to.
Is payable by the person purchasing property (dwellings, holiday homes, apartments and similar abodes).
Transfer duty can be considered as replacement for not paying VAT on a property you purchase as if the transaction is subject to VAT no transfer duty is payable. Transfer Duty is payable at the following rate:
|Property Value||Rates of Tax|
|R 0 – R1 000 000||Nil|
|R 1 000 001 – R1 375 000||3% on the value above R1 000 000|
|R 1 375 001 – R1 925 000||R 11 250 +||6% on the value above R1 250 000|
|R 1 925 001 – R2 475 000||R 44 250 +||8% on the value above R1 750 000|
|R 2 475 001 – R11 000 000||R 88 250 +||11% on the value above R2 250 000|
|R11 000 000 +||R1 026 000||13% on value above R10 000 000|
Also known as a death tax, estate duty is payable on a deceased estate. Your estate will be taxed at 20% for the first R30 million and at 25% for the value of an estate in excess of R30 million.
The executor of your estate is responsible for paying the estate duty over to SARS.
Skills Development Levy (SDL)
SDL is a tax payable by your employer at 1% of the payroll. As an employee you do not pay SDL.
Unemployment Insurance Levy (UIF)
Similar to SDL, UIF is collected by your employer and paid across to SARS; however, unlike SDL, your employer is obliged to deduct 1% of your salary from you and then contribute a further 1% before paying this amount over to SARS.
Securities Transfers Tax (STT)
Introduced in 2008, STT is a tax that is payable on every transfer of shares (securities) at the rate of 0.25%.
STT applies to the purchase and transfers of listed and unlisted securities. According to SARS the responsibility for the payment of STT is as follows:
- When listed securities are bought or transferred through or from a member or participant, the member or participant is liable for the tax.
- The transfer of any other listed security will result in the person, to whom the security is transferred, being liable for the tax. The tax must, however, be paid through the member or participant holding the security in custody. Should this not be the case, the tax must be paid through the company that issued the listed security.
- With the transfer of an unlisted security, the company which issued the unlisted security is liable for the tax. The company may, however, recover the tax payable from the person to whom the security is transferred.
Air passenger departure tax
Air Passenger Tax (APT) is chargeable on all passengers departing on an aircraft that leaves from a South African airport destined to somewhere outside of South Africa i.e. only international flights.
The current rate of APT is R190 per passenger but R100 for passengers departing to Botswana, Lesotho, Swaziland and Namibia. The tax is included in the price of the ticket and the various travel agents are responsible for paying the tax to SARS.
These are duties paid by importers on goods they bring into South Africa
There are 3 kinds of duties levied on imported goods
- Customs duties
- Anti-dumping and countervailing duties (applicable on goods from countries that have been found to ship excessive quantities to South Africa or heavily subsidised goods into South Africa)
There is a plethora of duties applied by SARS and so we will not review them here, suffice to say that they are payable by the importer. Unfortunately, while you do not pay these duties directly you ultimately end up paying these taxes through the increased price of the imported goods that you purchase.
SARS have embraced trying to provide for a better environment for future generations by introducing taxes that penalise what are non-environmentally friendly practises.
To date, according to the Organisation Undoing Tax Abuse (OUTA) over R103 billion has been collected through these “green taxes” as follows:
SARS have implemented the following Environmental taxes
Electric filament lamps
Introduced on the 2009/2010 tax year, this affects tungsten, halogen and incandescent lights. The intention of the tax is to increase the price of these lamps to make fluorescent (energy saving) lights (which are more durable) a more attractive option. The levy is R10 per globe.
Introduced in the 2009/2010 tax year, this levy is applicable to electricity generated within South Africa. The levy is 3.5c/KwH
Motor vehicle CO2 emissions
The CO2 tax is levied on all new cars. Given that most of the CO2 emissions that are polluting the environment are generated by the older, less environmentally friendly cars, this does appear to be an anomaly.
This tax was introduced in June 2019 and has the effect of raising the price of petrol by 9c/l and diesel by 10c/l.
This tax was introduced in the 2016/2017 year on all new or re-treaded pneumatic tyres. The tax of R2.30/kg was actually not really an increase as the South African Tyre Manufacturers Conference members had already been paying R2.30 to REDISA (Recycling and Economic Development Initiative of South Africa) which was then cancelled when the new tyre tax was introduced.
Certain types of plastic carrier and flat bags, the disposal of which is littering the environment, are subjected to the payment of an Environmental Levy. The environmental Levy on plastic bags of 25c/bag (12.5c/bio-based bags) is payable by the manufacturers of those bags.
The number of plastic bags produced has increased from 2 billion in 2005/2006 to 2.6 billion in 2018/2019 so it appears that this tax is not having the desired affect.
Excise duties and levies are imposed mostly on high-volume daily consumable products (e.g. petroleum and alcohol and tobacco products) as well as certain non-essential or luxury items (e.g. electronic equipment and cosmetics).
The primary function of these duties and levies is to ensure a constant stream of revenue to SARS, with a secondary function of discouraging consumption of certain harmful products; i.e. harmful to human health or to the environment.
The revenue generated by these duties and levies amount to approximately ten per cent of the total revenue received by SARS.
Currently, SARS levies excise duties on the following products:
- Ad Valorem Products
- These include, amongst others, Motor Vehicles, Electronic Equipment, Cosmetics, Perfumeries and other products generally regarded as “luxury items”. While these rates vary the rate is generally 9%.
- Alcohol Products such as
- Malt beer (R1.95 a 340ml can of beer)
- Traditional African Beer 34.7c/kg
- Spirits/Liquor Products (R74.23/l whiskey)
- Wine (4.65 on a 750ml bottle)
- Sparkling wine (R15.22 on a 750ml bottle)
- Other Fermented Beverages
- Petrol products
- Tobacco Products (R18.78 per pack of 20, 23g cigar R7.71)
The pump price of petrol, diesel and biodiesel have three main fuel taxes included:
- The General fuel levy of 393c/l (petrol) 379c/l (diesel)
- The Customs and excise levy of 4c/l for petrol and diesel
- The Road Accident Fund levy of 218c/l for petrol and diesel.
The carbon tax outlined above was also added on June 2019.
With the carbon tax the total taxes per litre are
- Petrol R6.15
- Diesel R6.01
Sugary Beverages levy
Another health tax introduced by SARS in 2018 was the sugar tax on sugary drinks. The tax is 2.21c/g of the sugar content that exceeds 4g/100ml which in effect is 10% of the price of a can of coke.
The tax is payable by the manufacturers of the sugary drinks violating the 4g/100ml threshold. In its first year this tax contributed just under R3 billion to SARS.
Diamond export levy
On 1 November 2008 a Diamond Export Levy on unpolished diamonds exported from the RSA was introduced
The export rate of duty is 5% of the total value. The aim of the Diamond Export Levy is to:
- Promote the development of the local economy by encouraging the local diamond industry to process (cut, polish etc.) diamond(s) locally;
- Develop Skills; and
- Create employment
Mineral and petroleum resources royalties
Historically, mineral and petroleum resources were privately owned, meaning that payment for the extraction of these resources was payable to the State only under certain circumstances, e.g. where mining had been conducted on State-owned land.
This was changed when the Department of Minerals and Energy introduced a new Act where these resources are recognised as the common heritage of all the people of South Africa with the State as custodian thereof for the benefit of all South Africans.
The royalty is now triggered on minerals extracted from within the Republic. The rate for the royalty is determined according to a formula and differentiates between the refined and unrefined conditions of the mineral resource, and are currently as follows –
- for refined mineral resources: minimum of 0.5% to a maximum of 5%
- for unrefined mineral resources: minimum of 0.5% to a maximum of 7%.
International oil pollution compensation fund contributions levy
This is a levy on registered ship owners which contributes to the International Fund for Compensation for Oil Pollution Damage, designed to help pay for damage arising from oil spills
While not exhaustive the above list of taxes, duties and levies demonstrates the number of opportunities that SARS have to relieve you of some of your hard-earned money. Thankfully most of these taxes are the responsibility of manufacturers and suppliers; however, as an individual you still have a number of potential responsibilities of having to pay taxes to SARS.