flag South Africa South Africa: Tax System

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
A company is considered to be resident in South Africa if it is incorporated, established, or formed in South Africa or has its place of effective management in the country (meaning by this the place where key management and commercial decisions that are necessary for the conduct of its business as a whole are taken).
 

Tax Rate

Corporate Income Tax 27% (for tax years ending on or after 31 March 2023; was 28% before)
Small business corporations (i.e. companies with only natural persons as members/owners and with gross income of not more than ZAR 20 million) (tax years ending before 31 March 2024) 0% on the first ZAR 95,750 of taxable income;
7% on taxable income above ZAR 95,750 but not exceeding ZAR 365,000;
21% on taxable income above ZAR 365,000 but not exceeding ZAR 550,000;
27% on taxable income exceeding ZAR 550,000 (for tax years ending on or after 31 March 2023).
Companies with a turnover of less than ZAR 1 million per year can elect an alternative turnover-based tax

Rates from 0% to 3%, depending on the turnover, as follows:

  • ZAR 1 – 335,000: 0% of taxable turnover
  • ZAR 335,001 – 500,000: 1% of taxable turnover above 335,000
  • ZAR ​500,001 – 750,000: ZAR ​1,650 + 2% of taxable turnover above 500,000
  • ZAR 750,001 and above: ​ZAR 6,650 + 3% of taxable turnover above 750,000
 
Tax Rate For Foreign Companies
South African resident companies are taxed on worldwide income, while non-resident companies are taxed on locally-sourced income only, as well as on capital gains arising from the disposal of immovable property and assets of a permanent establishment in the country.
Capital Gains Taxation
Only 80% of capital gains are included in taxable income and taxed at the normal income tax rate (thus the resulting effective tax rate stands at 22.4% for tax years ending before 31 March 2023 and 21.6% for tax years ending on or after that date). A resident is liable for the capital tax on assets located both in and outside South Africa, while a non-resident is liable to capital tax only on immovable property in South Africa or assets of a permanent establishment in the country.
Main Allowable Deductions and Tax Credits

In general, expenses incurred for the purposes of income generation are deductible.
The majority of taxes (with the exception of income taxes, donations tax, withholding taxes on interest, and dividends tax) are deductible from a company’s taxable income, provided they qualify for deduction under general rules. Losses may be carried forward indefinitely, as long as an active trade or business of a similar nature is carried on without interruption.
For tax years ending on or after 31 March 2023, companies with assessed losses will be entitled to set off a maximum of 80% of such losses (subject to a minimum of ZAR 1 million) against taxable income in a specific year. Loss carrybacks are not allowed.
Special relief is provided for start-up expenditure: when expenses would have been deductible had they been incurred after the commencement of trade, they are ring-fenced and may only be deducted against income from the trade to which the start-up costs relate. In general, interest expenditure incurred in the production of non-exempt income and for the purposes of trade is deductible.
Charitable contributions to certain approved public benefit organisations are tax-deductible (capped at 10% of taxable income).

If a taxpayer has included a certain amount in their taxable income in any tax year, and that amount becomes a bad debt at the end of the year of assessment, it may be tax deductible. Additionally, there is a tax allowance for doubtful debts. In the case of bad debts arising from loaned money, it is deductible only if it was lent as part of a money-lending business. Taxpayers may claim tax deductions for donations made to public benefit organisations that have been approved as charitable organisations, subject to a limit of 10% of their taxable income.
Foreign tax paid on foreign-source income may be credited against South African tax on the same profits, limited to the amount of South African tax payable on the foreign income.
Tax incentives are also provided for small business corporations, R&D, urban development, infrastructure development, public-private partnership grants, environmental expenditure deductions, energy efficiency savings, companies located in Special Economic Zones, etc.

Other Corporate Taxes

Micro-businesses with annual turnovers under ZAR 1 million may elect to be taxed under a micro-business tax system instead of the ordinary income tax, provisional tax, capital gains tax and VAT systems (at rates varying between 0% and 3% of turnover). Micro-businesses that qualify for the scheme can voluntarily exit the system at the end of any year of assessment. However, once out of it, they will not be permitted to re-enter.
Other special taxes include a 20% withholding tax on payments made to non-residents, individuals, and trusts for services provided, a 15% withholding tax on foreign entertainers and sportspersons, as well as a withholding tax on the acquisition of South African property by a non-resident. A tax on dividends applies to all South African resident companies as well as non-resident companies listed on the JSE at a rate of 20%.

Municipal taxes, a transfer tax on securities (0.25%), environmental taxes, financial transaction taxes, electricity and fuel levies, and donations taxes also apply (20% of the property with a value up to ZAR 30 million, 25% above this threshold; an annual exemption of ZAR 10,000 is available for companies; public companies are exempt from the donations tax). A skills development levy is payable monthly by the employers at the rate of 1% of payroll (companies with an annual payroll of less than ZAR 500,000 are exempt). Employers also contribute to the Unemployment Insurance Fund (1% of the employee’s gross remuneration, capped at ZAR 177.12 monthly) and to the fund for compensation for occupational injuries and diseases (rates vary depending on the sector of activity, salary capped at ZAR 506,473 per year/employee).

Local municipalities levy rates on land based on a percentage of the municipal valuation of land and improvements, which vary from municipality to municipality. Properties zoned for business use are generally taxed at a higher rate.
Transfer duty levied on the sale of immovable property is payable by the person acquiring the property within six months from the date of acquisition. Rates vary between 0% and 13% of the purchase price (the first ZAR 1.1 million is exempt). Transfers of immovable property subject to VAT are exempt from transfer duty.
Several environmental taxes apply, including a vehicle emissions tax, a fuel levy, a tyre levy and an electricity levy.

Other Domestic Resources
South African Revenue Service
 

Country Comparison For Corporate Taxation

  South Africa Sub-Saharan Africa United States Germany
Number of Payments of Taxes per Year 7.0 36.6 10.6 9.0
Time Taken For Administrative Formalities (Hours) 210.0 284.8 175.0 218.0
Total Share of Taxes (% of Profit) 29.2 47.3 36.6 48.8

Source: The World Bank - Doing Business, Latest data available.

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Accounting Rules

 

Accounting System

Accounting Standards
IFRS apply to all domestic and foreign companies. SMEs have the option to choose between IFRS Standards for SMEs and full IFRS. SMEs that have a public interest score under 100 points (under the Companies Act) and whose financial statements are internally compiled can use their own accounting policies if they are not required to comply with any other financial reporting standards.
Accounting Regulation Bodies
ASB, Accounting Standards Board
SAICA, South African Institute of Chartered Accountants
Accounting Law
The Companies Act of 2008 and the Auditing Profession Act of 2005
Difference Between National and International Standards (IAS/IFRS)
South Africa's accounting standards have been harmonised with international standards since 2001. For more details, visit Saica as well as the website of the Accounting Standard Board. This board develops and issues local accounting standards.
 

Accounting Practices

Tax Year
For companies, the tax year is the same as the accounting year. For individuals, the tax year begins on 1 March and ends on the last day of February of the following year.
Accounting Reports
In accordance with international accounting rules, annual accounts must provide the following information: the balance sheet, the profit and loss account and the notes to the accounts.
Publication Requirements
All companies must keep their accounts in English. Records must include the company's assets and liabilities, the fixed assets register, the company's income, the annual stock report, a summary of goods that were bought and sold. Moreover, they have to produce their annual financial statement, which must contain the balance sheet and annexes, a report on income with annexes, a report certified by the director, a report certified by the executives and a profit and loss account.
 

Accountancy Profession

Accountants
A Chartered Accountant provides services related to accounting & financial analysis, auditing, taxation, cost accountancy, etc. In order to become a certified Chartered Accountant (CA), one needs to pass an examination conducted by the College of Chartered Accountants .

The accountant is responsible for the legal obligations of the company in regards to accounting. As one of South Africa's foremost accountancy institutes, the SAIPA plays a very important role in ensuring that its members are able to optimize their accountancy practices or add value to their employers in the corporate world. To find an accountant in South Africa, visit Findanaccountant.

Professional Accountancy Bodies
SAICA, South African Institute of Chartered Accountants
SAIPA, South African Institute of Professional Accountants
Member of the International Federation of Accountants (IFAC)
Both SAICA and SAIPA are member of the International Federation of Accountants (IFAC).
Member of Other Federation of Accountants
South Africa is a member of the Pan African Federation of Accountants (PAFA).
Audit Bodies
Financial statements must be prepared annually, according to the International Financial Reporting  Standards (IFRS). Certain companies are required to have audited financial statements and other companies must have their financial statements independently reviewed (Companies Act requirements).
External auditors can be found at Independent Regulatory Board for Auditors (IRBA); ERNST & YOUNG in South Africa; KPMG in South Africa; PriceWaterhouseCoopers in South Africa.
 
 

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Consumption Taxes

Nature of the Tax
VAT = Valued Added Tax (BTW = Belasting over de Toegevoegde Waarde in Afrikaans).
Standard Rate
15%
Reduced Tax Rate
Zero-rated items include exports of goods and related services; international transport of passengers and goods and related services; certain supplies of goods that are used exclusively in an export country; services supplied outside South Africa and to foreign branches and head offices; services supplied directly in connection with land or any improvement thereto outside South Africa; certain services supplied to nonresidents; services deemed to be supplied to a public authority or municipality; certain basic foodstuffs; sanitary towels (pads); illuminating kerosene and leaded and unleaded gasoline; supply of gold coins issued by the reserve bank; supply of an enterprise capable of separate operation as a going concern (provided that all of the requirements are met); supply of fuel levy goods and certain fuels obtained from crude to be refined to produce fuel levy products; receipt of certain grants; supply of intellectual property for use outside of South Africa; supply of services to nonresidents subject to certain provisions.
Exclusion From Taxation
Exemptions include financial services, including Sharia finance premiums; fare-paying passenger transport by road or rail; educational services; childcare; donated goods supplied by certain non-profit (charitable) bodies; rental of residential accommodation; immovable property located outside South Africa. While all fee-based financial services are subject to VAT, interest charged is exempt.
Method of Calculation, Declaration and Settlement
VAT is applied on the domestic consumption of goods and services and on goods imported into South Africa. VAT is charged at each stage of the production and distribution process in proportion to the price charged for the goods and services.
All entities (including non-residents) with a total value of taxable supplies made in any consecutive twelve-month period exceeding ZAR 1 million must register for VAT purposes. All foreign suppliers of electronic services with South African customers must also register for VAT if taxable services exceed ZAR 1 million annually. Non-resident suppliers of electronic services are required to register for VAT on a payments basis and account for VAT on supplies of electronic services to South African residents.
VAT returns are submitted on a monthly basis (for annual turnover above ZAR 30 million) or on a bi-monthly basis. The VAT returns and payments are normally made on or before the 25th day after the end of the tax period.
Other Consumption Taxes
Other indirect taxes include: custom duties (on certain luxury items); anti-dumping and countervailing duties; excise duties on tobacco, alcoholic beverages, fuel and petroleum products; and excise levies on fuel, road accidents, electricity, sugar and tyres.
Transfer duty is levied at progressive rates up to 13% on the acquisition of an immovable property, provided that the transaction is not subject to VAT.
Donations are taxed at a rate of 20% (if the value of the property does not exceed ZAR 30 million) or 25% (value above ZAR 30 million), with an annual exemption of ZAR 10,000 available for companies (public companies are exempt from the tax).

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Individual Taxes

Tax Base For Residents and Non-Residents
South African residents are taxed on worldwide income and capital gains. Non-residents are taxed on their South African-source income and capital gains from immovable property located in South Africa.
An individual is considered to be resident in South Africa if he/she is physically present in the country for at least 92 days, in aggregate, in the relevant tax year and each of the preceding five tax years, and also for a minimum of 916 days, in aggregate, in the preceding five tax years. If a person deemed to be a resident is physically absent from South Africa for a period of at least 330 days, then the individual ceases to be a resident from the date of the beginning of the absence from the country.
 

Tax Rate

Individual tax rates (tax year commencing on 1 March 2023 and ending on 29 February 2024)
ZAR 0 to 237,100 18%
ZAR 237,101 to 370,500 42,678 + 26% of taxable income on the excess
ZAR 370,501 to 512,800 77,362  + 31% of taxable income on the excess
ZAR 512,801 to 673,000 121,475 + 36% of taxable income on the excess
ZAR 673,001 to 857,900 179,147 + 39% of taxable income on the excess
ZAR 857,901 to 1,817,000 251,258 + 41% of taxable income on the excess
ZAR 1,817,001 and above 644,489  + 45% of taxable income on the excess
 
Allowable Deductions and Tax Credits
Individual deductions include qualifying contributions to an approved pension, provident, or retirement annuity fund; charitable donations (up to a maximum of 10% of taxable income); and qualifying expenses for travel, motor vehicles and entertainment (limited to the travel allowance or fringe benefit). Deductions for medical expenses are converted to a medical tax rebate.
If an individual carries on a business, the deduction of business expenditure or losses applies on the same basis as to companies.
Please refer to the SARS website for more information.
Special Expatriate Tax Regime
There is no special expatriate tax regime in South Africa. Expatriates are taxed at the same rates as locals, but only on their South African-sourced income.
Non-residents are taxed on all income derived from a South African source or deemed to have a South African source and on capital gains on the disposal of immovable property situated in the country. The source of income is determined by the location of the originating cause of the income, and not by the location of the payer.
Capital Tax Rate
Individuals are charged a 0.25% securities transfer tax, and an inheritance duty on worldwide net estate (at a rate of 20% on the value of the estate to the limit of ZAR 30 million or 25% if the value of the estate is above ZAR 30 million, after abatement of ZAR 3.5 million from the net value of the estate).
A transfer tax applies to the sale of immovable property. It is payable by the buyer, with rates ranging from 0 to 13%. However, the transfers of immovable properties subject to VAT are exempt from transfer duty. Local municipalities levy rates on land, which vary according to the municipality.
For capital gains tax purposes, 40% of the gain is included in the individual’s taxable income and taxed at the applicable marginal tax rate (the general annual capital gains tax exemption for individuals is ZAR 40,000; various exclusions apply). For further information, consult the SARS website.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
South African Revenue Service, Double Taxation Agreements & Protocols
Withholding Taxes
Withholding taxes are: 20% for dividends paid to individuals or foreign companies, 0% if paid to national companies; 0 (resident)-15% (non-resident) for interests; 0 (resident)-15% (non-resident) for royalties.
Bilateral Agreement
South Africa and Mauritius concluded a Double Taxation Agreement.
The rates are 5 or 10% on dividends, 0 or 10% on interest and 5% on royalties.

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Latest Update: April 2024