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South Africa

Individuals in South Africa are subject to several taxes, including personal income tax, VAT, estate duty, donations tax and capital gains tax.

The tax year for individuals runs to the end of February. Tax returns must be filed by a date published by the Commissioner for the SARS, although extensions are often granted. An individual whose income from employment does not exceed ZAR 60,000 per year and who is not in receipt of any allowances or other income does not generally need to file a return. Standard income tax on employee (SITE) deductions and Pay As You Earn (PAYE), made by the employer, contribute towards the final tax liability of the individual.

Individuals who receive income other than employment income must make provisional tax payments. As such, they must make additional payments at six-month intervals during the tax year and a final payment six months after the end of the tax year. An assessment will be issued after an individual's tax return is filed and will detail any additional tax due (shortfall between the SITE, PAYE withheld and provisional taxes paid). The assessment is payable within 30 days after the due date provided in the notice of assessment.

South Africa operates a source- and residence-based tax system. South African residents are subject to tax in South Africa on their worldwide income and capital gains. Nonresidents are taxed only on their South African-source income and capital gains on immovable property or assets of a permanent establishment situated in South Africa. Interest from a South African source paid to a nonresident will not be taxable in South Africa if the person is outside South Africa for more than 183 days in the tax year and does not conduct a business in South Africa.

The term "resident" refers to individuals who are ordinarily resident in South Africa and to individuals who are not at any time during the relevant tax year ordinarily resident in South Africa, but who are physically present in South Africa for at least 91 days during each of the current and preceding five tax years, and physically present in South Africa for a period exceeding 915 days in aggregate during the five preceding years ("physical presence test").

The term "ordinarily resident" is not defined in the Income Tax Act, but South African tax courts have held that a taxpayer will be ordinarily resident in the place where that taxpayer's real permanent home is and the place to which the taxpayer will return. Although an individual's subjective intention underlies an assessment whether that person regards him/herself as ordinarily resident in South Africa, the SARS will consider a number of factors to determine whether a person's stated intention is objectively justifiable.

Where an individual could be deemed to be a resident of more than one country, the tiebreaker rules in a tax treaty between South Africa and the other country must be applied to determine the country of residence.

Taxable income and rates
The rules for determining the taxable income of corporate taxpayers also apply to individuals. Additional rules apply for, among other things, the taxation of fringe benefits and the deduction of employees' tax.

Tax rates on individuals are progressive. Married couples are taxed separately. There are six income brackets. The highest marginal tax rate is 40% and applies to income exceeding ZAR 490,000. A marginal rate of 18% applies to income up to ZAR 122,000.

The standard deduction ("primary rebate") is ZAR 8,280 against tax payable; for those older than age 65, an additional ZAR 5,040 is allowed. The tax threshold for persons younger than age 65 is ZAR 46,000. The corresponding threshold for persons age 65 or older is ZAR 74,000.

Certain benefits provided by virtue of employment are taxable (subject to "perks tax"). A company car is taxed at 2.5% of its value per month, with a second car taxed at 4% of its value per month. Housing benefits provided by the employer are also taxable. In certain circumstances, housing paid for by an employer for an employee seconded to South Africa is tax free subject to certain limitations.

Determination of taxable income
Taxable income is gross income less exempt income and allowable deductions. Gross income from employment includes all remuneration in cash or kind, including bonuses, allowances and taxes reimbursed or paid on the employee's behalf. It is sometimes advantageous to receive remuneration via fringe benefits rather than the cash equivalent.

Capital gains tax applies to individuals. Taxable income includes 25% of capital gains. The first ZAR 16,000 is exempt, as is the primary residence, except on capital gains of more than ZAR 1.5 million on the primary residence.

Dividends from South African companies are tax-free.

The tax-free portion for lump sums received from a pension, provident fund and retirement annuity is ZAR 300,000 in total per taxpayer. The tax-free portion also depends on whether an individual withdraws from the fund or retires from the fund. The non-exempt portion of such withdrawal is taxed at the average rather than the upper marginal rate. On retirement, the pension, provident fund or retirement annuity will be taxed as follows: 0% on the first ZAR 300,000; 18% on the next ZAR 300,000; 27% on the next ZAR 300,000; and 36% on any amount above this.

Deductions include the following personal expenditures: 

  • Unlimited expenditures on medical aid if over 65 years of age; otherwise, monthly medical contributions up to ZAR 570 for the taxpayer, plus ZAR 570 for the first dependent plus ZAR 345 for each additional dependent, less employer contributions not considered a fringe benefit and the balance of contributions plus medical expenses exceeding 7.5% of taxable income (before medical deduction);
  • Contributions to an approved pension fund at the greater value of 7.5% of retirement funding employment income or ZAR 1,750;
  • Current retirement annuity fund contributions limited to the greater of: (a) 15% of net income, excluding income derived from "retirement funding employment" (that is, pensionable earnings); or (b) ZAR 3,500 less deductible current pension contributions; or (c) ZAR 1,750; reinstatement contributions are deductible at ZAR 1,800 per year;
  • Charitable donations to certain public benefit organisations (up to 5% of taxable income calculated before medical expenses and donations);
  • Allowances for travel and motor vehicle expenses, subject to restrictions excluding non-business use and taxation on the unexpended portion; and
  • Entertainment expenses if an employee is paid on commission

Special expatriate tax regime
There is no special expatriate tax regime in South Africa. Expatriates are taxed at the same rates as locals. There may be an opportunity for housing to be provided by the local employer to an expatriate employee on a tax-free basis subject to certain limitations and criteria being met. Also, nonresidents are taxed only on South African-source income. Therefore, where an expatriate has split duties, the foreign duties will not be taxed in South Africa. 

Capital taxes
Individuals are subject to two types of capital tax. Donations tax is payable by South African residents who donate property. Estate duty is payable on the estate of individuals who die while resident in South Africa. The rate of both estate duty and donations tax is 20%. Estate duty is only payable on estates that exceed ZAR 3.5 million unless the estate is left to the surviving spouse, in which case no estate duty would be payable on the first death. Donations tax does not apply to the first ZAR 100,000 of the value of donations made.

Property transfer duties in South Africa are as follows. The threshold for exemption is ZAR 500,000. Property valued at ZAR 500,001- ZAR 1 million is subject to a 5% tax; property valued above ZAR 1 million is subject to tax at the rate of 8% on the value exceeding ZAR 1 million.


Source: Deloitte

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