Personal income tax is the tax imposed on the taxable income of individuals in South Africa. The amount of tax payable depends on taxable income, applicable tax rates, rebates, deductions and other provisions of the Income Tax Act.
Who Pays Personal Income Tax?
South African residents are generally taxed on their worldwide income, subject to exemptions, exclusions and relief available under South African law and applicable double taxation agreements.
Non-residents are generally subject to South African tax on income from South African sources, subject to the nature of the income and any applicable tax treaty.
Tax Rates and Rebates
South Africa applies progressive personal income tax rates. This means that higher portions of taxable income are taxed at progressively higher rates.
Individual taxpayers may also qualify for primary, secondary or tertiary rebates depending on their age.
Tax rates, rebates and thresholds are normally reviewed annually.
Taxable Income
Taxable income is not necessarily the same as the total amount received by a taxpayer.
Depending on the circumstances, taxable income may include remuneration, business or professional income, rental income, investment income, taxable capital gains and certain foreign income.
Exemptions, deductions and allowances may reduce the amount ultimately subject to tax.
Income Tax Returns
Taxpayers who are required to submit an income tax return generally do so through SARS eFiling or the SARS MobiApp.
Not every person who receives income is necessarily required to submit a return. Filing requirements depend on the taxpayer’s circumstances and the rules applicable to the particular tax year.
Provisional Tax
Provisional tax is not a separate tax. It is a method of paying income tax during the tax year rather than paying the entire liability after assessment.
It commonly applies to individuals who receive income other than ordinary remuneration from which employees’ tax has been deducted.
Capital Gains Tax
Capital gains tax forms part of the income tax system.
A taxable capital gain may arise when a person disposes of an asset for more than its relevant tax cost. Various exclusions and special rules apply, including provisions relating to a person’s primary residence.
Retirement and Investment Income
Special tax rules apply to pension, provident and retirement annuity funds, retirement benefits, interest, dividends and other forms of investment income.
Tax treatment can differ depending on the type of investment, the taxpayer’s age and whether amounts are received locally or from abroad.
Donations and Estates
Donations tax may apply to certain disposals of property made for inadequate consideration, subject to exemptions.
Estate duty may be payable on a deceased estate where the dutiable value exceeds the applicable abatement.
Foreign Income and Tax Residence
Tax residence can have a significant effect on an individual’s South African tax position.
South African tax residents are generally subject to tax on worldwide income, while non-residents are generally taxed on South African-source income. Foreign tax credits and double taxation agreements may provide relief where the same income is subject to tax in more than one country.
Keeping Tax Records
Taxpayers should retain appropriate records supporting income, deductions, allowances, expenses and information disclosed in tax returns for the periods required by law.
Good records can be particularly important where SARS requests verification or conducts an audit.
Official Information
Tax rates, thresholds, exemptions and administrative requirements change from time to time. Current requirements should therefore be confirmed from SARS and the legislation applicable to the relevant tax year.