Taxation may entail payments to at least two levels of government: the federal government (through SARS) and the local government. Before 2001, the South African tax system was “source-based,” meaning that income was taxed where it was earned. Since January 2001, the tax system has been “residence-based,” meaning that taxpayers residing in South Africa are taxed on all of their income, regardless of where it comes from. Only domestic taxes apply to non-residents.
Tax collection throughout the Republic of South Africa is the responsibility of the South African Revenue Service (SARS).
Personal income tax
Any person who earns income in South Africa must register with SARS for tax purposes, and if any employees of a company doing business in South Africa are registered with SARS for tax purposes, the firm must register as an employer with SARS. Furthermore, regardless of their tax status, any tax-registered company must register its personnel with SARS.
South Africa’s primary source of revenue is the personal income tax. It accounted for 38.1% of overall tax revenue in 2017/18.
Tax bracket
Below is the personal income tax bracket
| Income | Tax |
| 0 – R205 900 | 18% of taxable income |
| R205 901 – R321 600 | R37 062 + 26% of taxable income above R205 900 |
| R321 601 – R445 100 | R67 144 + 31% of taxable income above R321 600 |
| R445 101 – R584 200 | R105 429 + 36% of taxable income above R445 100 |
| R584 201 – R744 800 | R155 505 + 39% of taxable income above R584 200 |
| R744 801 – R1 577 300 | R218 139 + 41% of taxable income above R744 800 |
| R1 577 301 and above | R559 464 + 45% of taxable income above R1 577 300 |
VAT
South Africa’s value-added tax is a consumption tax on products and services. South Africa’s VAT rate is now 15% on most goods and services, as well as imported commodities, with some exclusions, such as some financial services.
Businesses must pay VAT to the government, but they can pass the expense on to their consumers or clients by including VAT in the cost of billed goods and services.
If a company’s yearly turnover surpasses R1 million in 12 months, it must register for VAT in South Africa.
Tourists and diplomats who visit South Africa can claim a VAT refund on products purchased in the nation. To be eligible, you must be a non-resident foreign passport holder or a South African passport holder who has moved to another country permanently. When leaving the nation, you can reclaim VAT by declaring the goods in question to a customs official.
Further information on how to make a claim can be found in the South African government’s guidance on VAT refunds for visitors.
Withholding tax on interest or royalties
Interest and royalties paid to or for the benefit of a foreign person located outside South Africa are subject to these two taxes. The tax rate in South Africa for this is 15%. The tax is owed by the foreign person, but it must be withheld by the person providing the payment. However, there are certain exceptions.
Donations tax
Donations tax is a property tax levied in South Africa on the value of any property given away as a gift. This is fixed at 20% of the property value up to R30 million, and 25% on properties valued at more than R30 million. The contributor is liable for tax payments. It has to be paid by the end of the month following the month of the donation.
There are several exceptions, such as if the property recipient is a spouse, a government agency, or a public benefits group. A donation is also excluded if the overall annual value of donations for individuals does not exceed R100,000 (R10,000 for businesses).
Inheritance tax in South Africa
In South Africa, estate duty is the name for inheritance tax, which is a property tax imposed on all estates with a net worth of more than R3,500,000. In South Africa, estate duty is 20% on homes worth up to R30 million and 25% on properties worth more.
