Until 1st January 2001, a ‘source-based’ tax system was in use, meaning that tax was payable only on income from (or deemed to be from) a South African source.
Since then, however, South African residents have been taxed on their worldwide income. This includes the income of a foreign-controlled company. Certain types of income from outside South Africa are exempt and credit is allotted for foreign taxes paid. Non-South African residents, however, are still taxed only on South African-source income.
Individuals are deemed to be resident in South Africa for tax purposes if they normally live in the country or are in South Africa for more than 183 days a year. Each individual is taxed separately in South Africa, with no distinction between male and female, or between married and single people.
The tax year is 1st March to 28th (or 29th) February. Tax is payable in instalments by companies, close corporations and those individuals who are classified as provisional taxpayers (e.g. directors of companies and members of close corporations). Individuals make two provisional payments based on estimated tax liability (in relation to previous years’ payments): the first due six months after the beginning of the assessment year (i.e. by the end of August), the second at the end of the assessment year (by the end of February).
Late payment results in a penalty and interest is payable. If the total paid is less than the amount due, a final payment must be made within seven months of the end of the assessment year (i.e. by the end of September). Interest (non-deductible) is due on the shortfall at a decreed rate (currently 11.5 per cent). If the amount paid exceeds the amount due, the overpaid amount is refunded and interest on is paid to the taxpayer – but at a considerably lower rate (currently 7.5 per cent) –. The interest is taxable for resident taxpayers!
Employees’ tax is deducted at source (‘Pay-As-You-Earn’) and paid by employers the tax to the authorities monthly. The tax thus deducted is a credit against the employee’s total tax liability as assessed by his or her annual tax return. Under the SITE system (Standard Income Tax on Employees), people earning under R74,000 (€7,640) per year aren’t required to file an annual income tax return, and the tax deducted from their salaries constitutes their total and only liability for tax.
Income tax rates for the assessment year ending February 2011 are as follows:
| Taxable Income (R) | Rate of Tax (R) |
| 0 – 140,000 | 19% of each R1 |
| 140,001 – 221,000 | 25,200 + 25% of the amount above 132,000 |
| 221,001 – 305,000 | 45,450 + 30% of the amount above 210,000 |
| 305,001 – 431,000 | 70,650 + 35% of the amount above 290,000 |
| 431,001 – 552,000 | 114,750 + 38% of the amount above 410,000 |
| 552,001 and above | 160,730 + 40% of the amount above 525,000 |
A primary rebate of R10,260 (€1,059) is available to all individuals for the tax year ending in February 2010, and a secondary rebate of R5,675 (€586) is available to those over 65.
The trusts' Rate of Tax is of 40%.
Local dividends from all companies and distributions from all close corporations are exempt from tax. Foreign dividends received by South African residents with a holding of less than 25 per cent in the company declaring dividends are usually taxable. The first R22,300 (€2,302) of interest and non-exempt foreign dividends received by individual resident taxpayers under the age of 65 is exempt from tax. The exemption rises to R32,000 (€3,304) for resident taxpayers aged 65 or over. The first R3,700 (€382) of the exemption applies to foreign dividends.
Foreign dividends qualify for tax exemption in the following circumstances:
Interest paid to non-residents (other than those who are residents of Lesotho, Namibia and Swaziland) is generally exempt from tax. In order to qualify, a non-resident must be absent from South Africa for not less than 183 days during the assessment year.
Tax is levied at 20 per cent on monthly gross interest, non-exempt foreign dividends and net rental received by or accrued to pension, provident and retirement annuity funds.