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Tax information: going to South Africa
Welcome to your tax guide on going to South Africa, produced for you by Deloitte. For tax information about leaving South Africa, Click here
The information is provided by Deloitte in accordance with their terms and conditions. HSBC does not accept any responsibility for the accuracy of this information.
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Before/once you arriveQ. Do I need a work permit to work in South Africa?
A. Yes. A valid work visa should be obtained prior to arrival in South Africa. Application must be made to the South African Embassy, High Commission or Consulate General in your home country, at least six weeks in advance of the intended commencement date of employment in South Africa. Temporary work permits are usually valid for 36 months and must be renewed thereafter.
Q. Should I complete any documentation upon arrival in South Africa?
A. As and when you earn in excess of R60,000 during a tax year, you are required to register for tax in South Africa.
The Application for Registration as a Taxpayer (Form IT77), should be completed and submitted to the office of the South African Revenue Service ("SARS") in the magisterial district where you live.
Q. Should I open an offshore bank account or is it OK to have an account on the South African mainland?
A. Offshore bank accounts do not provide tax benefits from a South African perspective but they may be useful from a home country tax perspective. Exchange control procedures mean that a âContract Workerâ paid by a South African company can transfer abroad funds accumulated during their stay in South Africa provided the individual can substantiate the source of such funds and that the value of such funds is reasonable in relation to their income generating activities in the Republic during the period.
Q. What is the tax year?
A. 1 March to 28 February.
Q. How will I be taxed in South Africa?
A. In general, if you become tax resident in South Africa you will be subject to South African tax on worldwide income. If you are a non-resident of South Africa you will be subject to South African tax on income related to services performed in South Africa irrespective of where the income is paid. Non-residents generally are entitled to the same deductions and personal rebates as are residents.
Q. How is tax residence determined?
A. As an individual arriving in South Africa you can establish tax residence in one of two ways, either through physical presence, or through ordinary residence.
The term "Ordinarily resident" is held to mean the country where your permanent home is located, and to where you intend to return.
In addition, you will be regarded as resident in South Africa if you are physically present there
(1) for more than 91 days during the current tax year as well as each of the three preceding tax years and
(2) for a total of 549 days during the three preceding tax years
Thus, you would generally only become resident in South Africa in your fourth year there.
Q. Are there any regional or state taxes?
A. No.
Q. Can I file a joint tax return with my spouse?
A. No. Each individual taxpayer must file a return.
Q. What rate of tax will I pay in South Africa?
A. The following tax rates apply for year of assessment commencing 1 March 2007:
| Taxable income exceeds R | But does not exceed R | Tax payable |
| 0 | 112,500 | 18% |
| 112,500 | 180,000 | 20,250 +25% |
| 180,000 | 250,000 | 37,125 + 30% |
| 250,000 | 350,000 | 58,125 +35% |
| 350,000 | 450,000 | 93,125 + 38% |
| 450,000 + | 131,125 +40% |
Q. What tax allowances and deductions are available in South Africa?
A. Allowances
The following rebates are provided to taxpayers filing returns in South Africa for the year commencing 1 March 2007:
Primary R7,740
65 years and over* R4,680
*Additional to primary rebate.
Deductions
The following deductions are provided to taxpayers in South Africa:
•Contributions to South African pension funds
•Retirement annuity fund contributions
•Medical expenses
- Over 65 years of age: Unlimited, and
- Under 65 years of age: Expenses exceeding 5% of taxable income
•Physical disability expenses exceeding R500.00
•Donations to approved public benefit organisations e.g. universities, other educational establishments, and certain charitable organisations in South Africa.
Q. I will also be paying tax in my home country. Am I being taxed twice?
A. No. South Africa has entered into income tax treaties with many countries providing for an exemption or reduction in the statutory tax rates for certain types of income. It may also be possible to claim a foreign tax credit on your home country return for the South African taxes paid on doubly taxed income. The method of avoiding double taxation will depend upon your situation, and the nature of the treaty agreement between your home country and South Africa.
Q. Do I need to file a South African tax return?
A. If you receive taxable income in excess of R60 000 during a tax year, you will be required to file a tax return. The income tax due is paid to SARS upon assessment. Tax return forms are mailed to all registered taxpayers (or your service provider). You must obtain a form from SARS if you are required to file a return but have not received a form.
Where a taxpayer has been assessed for tax and fails to pay any amount due under the assessment within the time frame allowed, interest is payable on the amount outstanding at a prescribed rate, currently 10.5%.
Q. When does it need to be filed?
A. The annual income tax return must be submitted by June/July following the close of the tax year ending on February 28/29. SARS stipulate an exact date for each tax year in which the return is issued.
Q. Can the filing deadline be extended?
A. Yes. A taxpayer who is unable to file a return before the published date may apply for an extension of time within which to submit the income tax return. This is usually for a number of months but can be up to a year in exceptional circumstances. However SARS are looking at becoming stricter in this regard and may not grant extensions as easily in the future.
Q. What is the procedure for paying tax?
A. In general, employment taxes are withheld monthly by employers from employees’ remuneration, and are credited against the final tax liability upon assessment. Employee taxes are classified as:
•Standard Income Tax on Employees (SITE), is a non-refundable employees tax applicable to the first R 60,000 per year of remuneration earned by employees from standard employment.
•Pay As You Earn (PAYE), is a tax applicable to remuneration in excess of R 60,000.Remuneration is broadly defined to include salaries, wages, commissions, bonuses, fringe benefits, pensions etc.
Taxpayers who receive income which is not subject to employees’ tax, e.g. passive investment income are subject to the provisional (estimated) tax provisions. Provisional taxpayers must pay income tax on a six monthly basis, based on the “basic amount.” The basic amount is the lesser of the most recent assessment received by the taxpayer, or the estimated tax for the year. In the latter case, the estimated taxable income must be at least 90% of actual income in order for interest charges to be avoided.
There are also various employment related levies which are detailed in Annexure A, attached.
Q. Will non-cash compensation be taxable (e.g. housing)?
A. Generally, benefits such as assignment premiums, cost-of-living allowances, primary or secondary school tuition for children, language lessons for family, cash allowances, and tax-equalization reimbursements are included in as taxable income.
However, tax relief is available in respect of certain benefits and expenses, as follows:
• Accommodation provided to international assignees while away from their usual place of residence may be treated as tax free, provided that the rental contract is entered into between the company and the landlord, and the lease payments are made directly by the company to the lessor. This however is currently under scrutiny from SARS and revisions may be made to the treatment in future.
• Relocation expenses equal to one months basic salary my be exempt from income tax
• Educational expenses may not be taxable where a grant is made available exclusively to an employee and this is not linked to any forfeiture of pay.
• Assets awarded for long service.
• Subsistence allowances where an employee is travelling on business for periods not exceeding six weeks.
Q. I will be working in different countries while living in South Africa. Will all of my employment income be taxable in South Africa?
A. South African tax residents are subject to tax in South Africa in respect of their worldwide income.
Non tax residents are subject to tax on employment income related to services physically performed in South Africa, irrespective of where it is paid. As such it is possible to pro-rate an assignees income to exclude the income pertaining to work days the assignee was physically absent from South Africa in a tax year.
Q. Will I pay South African tax on investments and rental income generated in my home country?
A. If you are a resident for South African tax purposes, you are taxable on your worldwide income including passive investment income and capital gains. Worldwide dividends and interest are taxed at the normal staggered tax rates. Local dividends earned in the South Africa are exempt from tax in the South Africa. Interest income earned up to R18, 000 by individuals under the age of 65, is exempt from tax in the 2007 tax year. Interest income earned up to R26, 000 by individuals over the age of 65 is exempt from tax in the 2007 tax year.
Rental income and royalties are taxed at the normal staggered rates, after expenses are deducted (e.g. mortgage interest).
Tax relief should be available in respect of doubly taxed income. The method for mitigating double taxation will depend upon the specific agreement between South Africa and your home country.
Non tax residents of South Africa are subject to tax only on income from South African sources.
Q. Is there a Capital Gains Tax regime in South Africa?
A. Yes. Capital gains (or losses) in excess of the R15,000 exemption, are included in income and taxed at marginal rates. Individuals have 25% of the gain included in income and taxed at their marginal rate (usually 40%), creating an effective tax rate of 10%. Certain exemptions and exclusions also exist.
If you cease to be tax resident you will be deemed to have disposed of all your worldwide assets at their market value at the date you cease to be resident, with the exception of immovable property situated in South Africa, including interests and rights therein as well as assets attributable to a “permanent establishment” in South Africa.
Q. Is my home country pension plan tax efficient for South African purposes?
A. Probably not. It is likely that your home country scheme does not qualify under South African law and therefore your contributions will not be deductible for South African tax purposes.
It may be possible to obtain some tax relief if a tax treaty exists between South Africa and your home country.
Q. Will my home-country tax efficient savings be effective in South Africa?
A. Probably not. Most non-South African savings vehicles are not tax efficient for South African purposes.
Q. What do I need to know about any other tax regime, e.g. Inheritance, Estate or Wealth tax?
A. If a taxpayer is ordinarily resident in South Africa at the time of death, all assets, wherever situated, form part of the total value of the estate, on which liability for estate duty will be determined. The estate is subject to estate duty if the net value of the estate exceeds R3.5 million. Duty is payable on the excess. As an exception, assets situated outside South Africa are excluded if they were acquired by the deceased before becoming tax resident in South Africa for the first time, or were acquired from a non-resident by way of an inheritance or gift. Estate duty is currently levied at the rate of 20% on the net value of the estate.
A person who is not ordinarily resident in South Africa at the time of death will only be subject to estate duty on all immovable and moveable property situated in South Africa and licences, patents, etc. registered or enforceable in South Africa or attached to any trade in South Africa.
Gifts and Donations Tax
Donations tax is payable at a flat rate of 20% on taxable donations made by persons tax resident in South Africa. Donations tax is not due where the property donated by a donor does not exceed R100 000 during any year of assessment.
Donations made by persons not tax resident in South Africa are generally not subject to donations tax.
Transfer duty
Transfer duty is levied by the State on all transfers of ownership of immoveables such as land and certain interests in land. Transfer Duty is payable at the following rates on transactions which are not subject to VAT -
| Value of Property (R) | Rate |
| 0 – 500,000 | 0% |
| 500,001 – 1,000,000 | 5% |
| 1,000,001 and above | 8% |
For any transfers to a corporate entity or trust the rate is 8%.
Value-Added Tax ("VAT")
VAT is charged on the supply of goods or services and on the importation of goods or services, by any person, at the rate of 14%. The Value-Added Tax Act provides that non-residents qualify for a VAT refund on items purchased and subsequently taken out of the country. VAT refunds will only be made where the non-resident removes the goods from South Africa within 12 months of the date of original tax invoice.
No VAT refunds will be granted to foreign nationals who work in South Africa on a temporary work permit, nor to their spouses.
Q. Am I required to pay South African Social Security?
A. No South African social security system exists per se. Certain payroll and other taxes are imposed, mainly on the employer. South Africa has not entered into any Social Security agreements with other countries.
Q. Are there any other levies payable in South Africa?
A. Yes. Unemployment Insurance Fund (UIF) Contributions and Skills Development Levies (SDL) are payable. However, non-resident employees who are foreign nationals are excluded from this contribution to the extent that they are employed on a contractual basis.
Skill Development Levy is payable at a rate of 1% of taxable income.
This document has been prepared based on the legislation and practices of the country concerned as at 01 July 2007. Income tax legislation and administrative practices may change, and this document should be regarded as a summary guide rather than as a substitute for consultation with your appropriate in-country tax contact.
The information is provided by Deloitte in accordance with their terms and conditions. HSBC does not accept any responsibility for the information contained therein
To view Deloitte terms and conditions in relation to the provision of this tax information you can download it here .
