How we Collect Tax – Layman Version

Here is a clear and easy-to-understand guide on South African taxation, designed for a general audience, including South Africans living in South Africa or working abroad. This information is drawn directly from the provided “Excerpts from ‘South African Taxation: A Comprehensive Guide to Levies and Duties'”.

 

Understanding South African Taxes: A Simple Guide

• • This guide provides an overview of key South African taxes that might affect you, whether you live locally or work internationally. The South African Revenue Service (SARS) is responsible for collecting these taxes, which are then paid into the National Revenue Fund.

e Tax: The Core of South African Taxation

• • Income Tax is the South African government’s main source of income and is managed under the Income Tax Act, 1962. How it applies to you depends on whether you are considered a resident or non-resident for tax purposes:

For South African Residents:

• • You are taxed on all your income from anywhere in the world. This is known as “worldwide income” taxation.
  • The system includes “appropriate relief to avoid double taxation” to ensure you are not taxed twice on the same income by different countries. Please note: While the sources state that relief is provided, they do not detail the specific mechanisms for avoiding double taxation, such as tax treaties or foreign tax credits. For specifics, you would need to consult detailed SARS guidelines or a tax professional.
  • Your taxable income is calculated by taking your total earnings (gross income) and subtracting any allowed exemptions and legitimate deductions as outlined in the Act.
  • Small business corporations can benefit from special graduated tax rates on their taxable income and may also be able to write off certain investment costs in the year they occur.

For Non-Residents (Individuals Not Living in South Africa):

• • You are only taxed on income that comes from a South African source.
  • A common example of South African-sourced income for non-residents is rental income from a property located in South Africa.
  • Pay-As-You-Earn (PAYE): This is a tax system mentioned as something individuals can learn more about.

Capital Gains Tax (CGT)

• • Introduced in October 2001, Capital Gains Tax is part of the income tax system.
  • It means that any capital gains (profits made from selling certain assets) are included in your taxable income.

Value-Added Tax (VAT)

• • VAT is levied on most goods and services in South Africa, with some exceptions and adjustments.
  • The standard VAT rate increased from 14% to 15% on 1 April 2018.
  • It is levied throughout the business cycle and on the importation of certain goods and services into South Africa.
  • VAT is the government’s second biggest source of income.

Donations Tax

• • This tax applies when a South African resident disposes of property by means of a donation.
  • The tax is payable on the total value of the property donated.

Estate Duty

• • Estate Duty is a tax on the value of a deceased person’s property (their “estate”).
  • For deceased South African residents: The estate includes all their property, no matter where it is located, including things considered “deemed property” like life insurance policies.
  • For deceased non-residents: The estate only includes their South African assets.
  • The duty is calculated at a rate of 20% on the dutiable amount of the estate, after certain admissible deductions are allowed.

Transfer Duty

• • This tax is payable when property is acquired.
  • It is calculated at progressive marginal rates.
  • Importantly, any transactions involving a taxable supply of goods that are already subject to VAT are exempt from transfer duty.

Dividends Tax

• • Dividends Tax is a tax paid by shareholders (beneficial owners) when they receive dividend payments.
  • Under normal circumstances, this tax is withheld from the dividend payment by a withholding agent, which can be either the company paying the dividend or a regulated intermediary.

Securities Transfer Tax

• • This tax applies to every transfer of any security (like shares) that occurs on or after 1 July 2008.
  • It is levied at a rate of 25%.

Skills Development Levy (SDL)

• • SARS collects the SDL on behalf of the Department of Higher Education and Training.
  • It is compulsory for certain employers as per the Skills Development Levies Act, 1998, to fund education and training.
  • The rate is 1% of an employer’s payroll.
  • This levy applies to employers who are registered with SARS for employees’ tax purposes and have an annual payroll exceeding R500,000.

Unemployment Insurance Fund (UIF)

• • The UIF provides short-term financial relief to workers who become unemployed or are unable to work due to reasons like maternity or adoption leave, or illness.
  • It also provides relief to the dependants of a deceased contributor.
  • Most contributions to UIF are collected by SARS and transferred to the fund.

Air Passenger Tax (APT)

• • This tax applies to passengers departing on international flights from South Africa.
  • Current rates for most international flights are R190.
  • A lower rate is charged for passengers flying to Botswana, Lesotho, Namibia, and Swaziland.

Other Taxes and Levies (Brief Mentions)

• • The sources also mention other taxes like Customs Duty, Excise Duty, Environmental Levy, Fuel and Road Accident Levy, Trade Remedies, International Oil Pollution Compensation Fund levy, Mineral and Petroleum Resource Royalty, provincial gaming taxes, and local government rates on fixed property. While important, these primarily relate to specific goods, industries, or local services rather than general individual income or wealth taxation.