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SARS Compliance | Accounting Services

How Does Income Tax Work in South Africa?

Tinashe Munyati, Chartered Certified Accountant, Fourways

May 27 2019

Income tax in South Africa is collected by the South African Revenue Service (SARS). All residents living and working in South Africa are liable to pay income tax in South Africa, although the amount of SARS income tax you must pay depends on your tax residency status and earning bracket.

South Africa operates on a residency-based taxation system, meaning that residents (whether permanent or temporary) pay tax on their worldwide incomes. Residents are those with citizenship or residence permits. Those classified as non-residents will pay South African income tax only on income earned inside the country.

What earnings are subject to SARS income tax?

Income tax in South Africa includes individual and business income tax. Small business income tax information can be found here.

SARS income tax applies to the following type of earnings: 

  • employment income including salaries, bonuses, overtime and taxable benefits and allowances (in most cases deducted from wage payments by employers through a pay-as-you-earn or PAYE scheme)
  • profits or losses from a business or self-employed trade
  • director’s fees
  • rental income
  • investment income such as interest or dividends
  • annuities
  • royalties
  • pension income (excluding foreign pensions)
  • certain capital gains.

Income tax brackets

Income tax brackets in South Africa are progressive like elsewhere, where you pay a higher income tax rate the more you earn.

The income tax in brackets South Africa for 2019 (1 March 2018 – 28 February 2019) are listed below:

  • Up to R195,850: 18% of taxable income
  • R195,851–R305,850: 26% (R35,253 plus 26% of taxable income above R195,850)
  • R305,851–R423,300: 31% (R63,853 plus 31% of taxable income above R305,850)
  • R423,301–R555,600: 36% (R100,263 plus 36% of taxable income above R423,300)
  • R555,601–R708,310: 39% (R147,891 plus 39% of taxable income above R555,600)
  • R708,311+: 41% (R207,448 plus 41% of taxable income above R708,310)
  • R1,500,001+: 45% (R532,041 plus 45% of taxable income above R1,500,000)

Filing your income tax return

The South African tax year runs from 1 March to 28 February. The tax season, when people are required to file their income tax returns, is July to November. The deadlines for submitting income tax return forms in South Africa for the 2019 tax year are as follows:

  • 24 November 2019: at a SARS branch (provisional and non-provisional)
  • 24 November 2019: SARS eFiling (non-provisional)
  • 31 January 2020: provisional taxpayers via eFiling

If you are employed in South Africa, your employer will deduct your SARS income tax contributions from your salary, but you will still need to complete an annual income tax return. The only exemptions are for those earning under R350,000 gross salary from a single employer and who have no additional sources of income or deductions they want to claim.

Those submitting a late income tax return or making a late payment will be liable for an admin penalty, which is outlined by the SARS income tax authority.

How to complete a tax return

You will first need to be registered as a South African taxpayer and have a SARS income tax number. This will typically be done by your employer.

Once you have your SARS income tax number, you can complete your tax return on paper or online. You can obtain a paper copy of the form from your local SARS office. To complete a tax return online, you will need to register for eFiling.

The income tax return for individuals is called form ITR12. To complete the ITR12 form, you will need:

  • your bank statements
  • information on all forms of income and allowances/deductions you are including in the form
  • your tax number
  • your employee tax certificate (IRP5/IT3a), if applicable
  • certificates (IT3b) for any investment income
  • medical aid certificate for details of contributions made that do not appear on your IRP5/IT3a certificate.

 

If you need help with submitting your tax returns or compiling your information to submit to SARS and want a company you can trust to help you through this process, please get in touch with us.

Citations & references:

sars.gov.za/ClientSegments/Individuals/Tax-Stages/Pages/Tax-and-start-working.aspx

sars.gov.za/TaxTypes/PIT/Pages/default.aspx

sars.gov.za/Tax-Rates/Income-Tax/Pages/Rates%20of%20Tax%20for%20Individuals.aspx

sars.gov.za/ClientSegments/Businesses/SmallBusinesses/Pages/default.aspx

expatica.com/za/finance/taxes/calculating-your-income-tax-in-south-africa-105863/

Disclaimer:

This article is for information purposes only and you are advised to seek professional advice from your own accountant as your individual situation will vary.