For the new or prospective immigrant to South Africa Personal Taxation may be one of the major considerations, especially for the higher net worth individuals.
Tax is all about planning, knowing the regulations and ensuring you make the most appropriate plan to mitigate paying tax that you may legally not pay.
Below we provide you with some of the important information regarding South Africa Personal Taxation, but as said, planning is everything, so we encourage you to make contact regarding your own South Africa Personal Taxation situation as soon as possible.
Background to South Africa Personal Tax Rules
South Africa operates under a residency-based system of taxation.
In essence this means if one is viewed as resident for tax purposes, you are liable to taxation on your worldwide income. It does however have in place a dual taxation agreement with most European countries, specifically to ensure fair and equitable treatment of an individual.
In essence this means that establishing your residency is of vital importance. Whether you are working in South Africa or not tax could be payable and planning could prevent unnecessary tax. Further, residency is not based on a particular permit that you hold but by SARS definition of residency.
Personal Taxes you may liable for
VAT (Value Added Tax)
VAT is an indirect tax payable at 15% and levied on transactions such as goods or services purchased. VAT is not charged on wages, hobbies or private recreational pursuits or the odd sale of personal goods or certain exempt goods and services. Exports are also nil rated.
Capital Gains Tax (CGT)
Capital Gains Tax arises when you dispose of an asset for proceeds that exceed its base cost. Disposal can be via:
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The sale of an asset;
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Donation of an asset;
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The loss or destruction of an asset;
- Death; or
- Emigration.
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The following are some of the specific exclusions:
- R2 million gain or loss on the disposal of a primary residence;
- Most personal use assets;
- Retirement benefits;
- Payments in respect of original long-term insurance policies;
- Annual exclusion of R40 000 capital gain or capital loss is granted to individuals and special trusts;
- Small business exclusion of capital gains for individuals (at least 55 years of age) of R1.8 million when a small business with a market value not exceeding R10 million is disposed of; and
- Instead of the annual exclusion, the exclusion granted to individuals is R300 000 for the year of death.
Transfer Duty
Transfer Duty is levied when a property changes ownership. The following rates apply:
| VALUE OF PROPERTY (Rand) | RATE |
|---|---|
| R0 - R900 000 | 0% |
| R900 001 - R1 750 000 | 3% of the value above R900 000 |
| R1 750 001 - R2 250 000 | R10 500 + 6% of the value above R 1 250 000 |
| R2 250 001 - R10 000 000 | R40 500 + 8% of the value above R 1 750 000 |
| R2 250 001 - R10 000 000 | R80 500 +11% of the value above R2 250 000 |
| R10 000 001 and above | R933 000 + 13% of the value above R10 000 000 |
Estate Duty
Estate Duty is commonly known in many countries as Inheritance Tax.
If the deceased person was resident in South Africa, Estate Duty is payable on the entire estate; for non residents it is payable on South African assets. Estate refers to all property, life-insurance policies and pension funds of the deceased. The estate of a deceased person is subject to 20% Estate Duty on the first R30 million of the dutiable amount of an estate and 25% on the amount exceeding that figure, after taking into account a deduction of R3.5 million against the net value of the estate.
Donations tax
Donation tax is payable at 20% on the first R30 million of donations made during a tax year and then at the rate of 25% on donations exceeding R30 million, with an annual exemption of up to R100,000 of the value of all donations made during the tax year.
Income tax
Residents are taxed on their worldwide income, subject to certain exclusions. Foreign taxes on that income are allowed as a credit against South African tax payable.
Below are the current income tax rates:
Income tax rates for 2019/2020 tax year
| Taxable income (in Rands) | Rates of tax |
|---|---|
| 0 - 195 850 | 18% of taxable income |
| 195 851 – 305 850 | 35 253 + 26% of taxable income above 195 850 |
| 305 851 – 423 300 | 63 853 + 31% of taxable income above 305 850 |
| 423 301 – 555 600 | 100 263 + 36% of taxable income above 423 300 |
| 555 601 – 708 310 | 147 891 + 39% of taxable income above 555 600 |
| 708 311 – 1 500 000 | 207 448 + 41% of taxable income above 708 310 |
| 1 500 001 and above | 207 448 + 41% of taxable income above 1 500 000 |
You are liable to pay income tax if you earn more than R79 000 in the 2020 year of assessment, and are younger than 65 years of age. If you are 65 years of age or older, the tax threshold (i.e. the amount above which income tax becomes payable) increases to R122 300. For taxpayers aged 75 years and older, this threshold is R136 750. If you earn in excess of these amounts you must also register for income tax.
- Primary R14 220;
- Secondary (Persons 65 and older) R7 794;
- Tertiary (Persons 75 and older) R2 6o1;
Withholding tax
Any person (resident or non-resident) who purchases South African immovable property from a non-resident will, from 1 September 2007, be obliged to withhold between 5% – 10% from the purchase price if the purchase price exceeds R2 million. Immovable property could in certain circumstances include the shares in a company which owns South African immovable property.
Any amount so withheld must be paid to SARS within a certain time period. Estate agents and conveyancers are obliged to notify the purchaser in writing if the seller is a non-resident and if there may be a withholding obligation.
Summary
Most taxation systems around the world are far from simple and South Africa follows this trend. Planning is key as always and we await your enquiry to discuss your personal taxation.
