Understanding What Levies And Taxes Individuals and Companies Must Register and Pay For, And How Often (South Africa)
Penalties for incorrect, incomplete or late submissions of documents and payments required by the South African Revenue Services (SARS) can be harsh.
As certain information is naturally subject to change, amounts (or percentages payable) have not been included and instead you are required to obtain this information directly from SARS and to ensure you keep up-to-date on a regular basis.
It is well worth hiring an expert to assist you in putting in the correct tax codes and completing the returns. In South Africa, annual financial statements must be lodged within six months of the end date of a current financial year e.g. if the financial year ends on 28 February, returns need to be in by 31 August.
Once you have registered your business or organization, you are required to register with the Unemployment Insurance Fund (UIF) and contribute towards the fund if you have employed people for more than 24 hours per month. The monthly contribution for UIF in 2017 is two percent of your worker’s gross salary per month. You must deduct one percent of your worker’s gross salary per month and you as the employer contributes one percent.
If you earn more than a specific amount that is determined every year, you need to register as a taxpayer with the South African Revenue Service (SARS) within 60 days of receiving income. Income tax is the normal tax which is paid on your taxable income. You must submit a tax return to SARS in order for SARS to calculate whether you must pay more tax or whether they must give you a refund. You register as a taxpayer, by completing an IT77 registration form which can be obtained from the SARS website.
Companies automatically fall into the provisional tax system. If you earn income other than a salary or an allowance, you must register as a provisional taxpayer. You must then pay tax in advance in at least two amounts during the year of assessment, based on estimated taxable income. You will have to do a final payment after being assessed.
The following information has been given to us by SARS and it would be wise for you to schedule regular visits to the website so that you can keep up-to-date with requirements.
The following is a list of the type of taxes applicable in South Africa :
Air Passenger Tax (APT) : It is only applicable to chargeable passengers leaving on an international flight. Non-carrying passenger Airlines (cargo) are required to register for APT purposes but are not liable for APT payments.
Capital Gains Tax (CGT) : This tax is part of income tax and applies to individuals, trusts and companies. It applies when you dispose of an asset for proceeds that exceed its base cost but not all assets attract CGT and certain capital gains and losses are disregarded.
Corporate Income Tax (CIT) : The form to be completed and submitted is an ITR14. This tax applies to companies based in South Africa, as well foreign companies which operate through a branch or have a permanent establishment here through which income is sourced. When submitting your return you will need to give the SIC code for your business. Every registered taxpayer is required to submit a return of income twelve months after the end of the financial year. CIT applies to :
- Listed public companies
- Unlisted public companies
- Private Companies
- Close Corporations
- Collective Investment Schemes
- Small Business Corporation (s12E)
- Body Corporates
- Share Block Companies
- Dormant Companies
- Public Benefit Companies.
Customs Duties : Are levied on imported goods and are usually calculated as a percentage of the value of the goods. Customs Clients who are deferment account holders need to adhere to the 13th deferment payment requirement which becomes due by each financial year-end.
Diamond Export Levy : This is a levy which applies to the export of unpolished diamonds.
Dividends Tax : Dividends Tax is a tax charged on shareholders (beneficial owners) when dividends are paid to them, and, under normal circumstances, is withheld from their dividend payment by a withholding agent (either the company paying the dividend or, where a regulated intermediary is involved, by the latter). A dividend is in essence any payment by a company to a shareholder for a share held in that company, excluding the return of contributed tax capital (i.e. consideration received by a company for the issue of shares). It is triggered by the payment of a dividend by any South African tax resident company or Foreign Company whose shares are listed on the JSE. Dividend payments by headquarter companies are not subject to Dividends Tax.
Donations Tax : This is a tax on property which is donated and applies to any individual, company or trust that is a resident as defined in section 1 of the Income Tax Act, 1962. Non-residents are not liable for donations tax. Donations between spouses and approved public benefit organizations are exempt. Casual gifts by companies and trusts; and donations by individuals are exempt provided they do not exceed values specified by SARS (as the amount changes, consult the sARs website for up-to-date information). The form to be completed and submitted is an IT144.
Estate Duty : Even if Estate Duty is not payable you have to inform SARS that a person is deceased. Estate Duty is payable on the estate of every person who dies and whose net estate is in excess of the value specified by SARS.
Excise Duties and Levies : These taxes are imposed on high-volume daily consumable products (e.g. petroleum and alcohol and tobacco products) as well as certain non-essential or luxury items (e.g. electronic equipment and cosmetics).
International Oil Pollution Compensation Fund Levy (IOPCF) : This levy is to be paid by all persons who receive crude and heavy fuel oil (by sea) in excess of 150,000 metric tonnes per annum in South Africa, or landed by sea in a non-member country and transported by other means to South Africa.
Mineral and Petroleum Resource : Royalties are payable by any person who holds a prospecting right, retention permit, exploration right, mining right, mining permit or production right or a lease or sublease in respect of such a right; and by any person who wins or recovers a mineral resource extracted from within the Republic.
Pay as You Earn (PAYE) : This is the tax required to be deducted by an employer from an employee’s payable or paid remuneration. An employer who is registered (or required to register) with SARS for PAYE and/or Skills Development Levy (SDL) purposes, is also required to register with SARS for the payment of Unemployment Insurance Fund (UIF) contributions to SARS. Employers are required to submit PAYE Employer Annual Reconciliations Declarations (EMP501), confirming or correcting payroll tax amounts which were declared during the specified period 1 March – 31 August 2016. Employers must accurately verify and update each employee’s personal and financial details before submitting their Annual Reconciliation Declaration (EMP501) and Employees Income Tax Certificates (IRP5/IT3(a)s) to SARS. Should these details be incorrect on an IRP5 certificate, the employee will be unable to file his/her Income Tax Return for Individuals (ITR12) during Tax Season. Individuals will no longer be allowed to make any corrections to pre-populated IRP5 details on their returns. In cases where details are incorrect, employees will have to revert to their respective employers who will need to make changes on the IRP5 and re-submit these to SARS. This process can be time consuming and it may become problematic for employees to file on time.
Personal Income Tax : This is the normal tax which is paid on your taxable income, if you earn more than a certain annual amount specified by SARS. Examples of amounts an individual may receive, and from which the taxable income is determined, include :
- Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
- Profits or losses from a business or trade
- Income or profits arising from an individual being a beneficiary of a trust
- Director’s fees
- Investment income, such as interest and foreign dividends
- Rental income or losses
- Income from royalties
- Pension income
- Certain capital gains
Provisional Tax : Provisional tax is not a separate tax but a method of paying tax due, to ensure the taxpayer does not pay large amounts on assessment, as the tax liability is spread over the relevant year of assessment. The first return is required to be submitted six months from the start of the year, and the second at year end, and must contain an estimate of the total taxable income earned or to be earned for that period. Payment of the tax must accompany the return. A third “top-up” payment may be made six months after year-end. In addition to annual returns, every company is required to submit provisional tax returns. Every person who receives income (or to whom income accrues) other than a salary, is also a provisional taxpayer. There is no formal registration or deregistration needed to be a provisional taxpayer. If a taxpayer is liable for provisional tax, he or she merely needs to request and submit an IRP6 return via eFiling. The following are excluded from paying provisional tax :
- approved public benefit organizations or recreational clubs;
- body corporates, share block companies or certain associations of persons;
- non-resident owners or charterers of ships or aircraft;
- any natural person who does not earn any income from carrying on any business – provided that person’s taxable income will not be more than the tax threshold (or the taxable income of that person, earned from interest, foreign dividends and rental from letting of fixed property, will not be more than the threshold).
Securities Transfer Tax : Securities transfer tax applies to the purchase and transfer of listed and unlisted securities namely shares or depositories in a company; or a member’s interest in a close corporation (CC).
Skills Development Levy (SDL) : Employers must pay X% of all their workers’ pay to the Skills Development Levy. The levy may not be deducted from workers’ pay. SDL is imposed to encourage learning and development in South Africa and is determined by the annual amount paid out in salaries (including overtime payments, leave pay, bonuses, commissions and lump sum payments) by an employer. It comes into effect above a certain threshold which is subject to change. The amounts deducted or withheld by the employer must be paid to SARS each month – the EMP201 is a payment declaration in which the employer declares the total payment together with the allocations for PAYE, SDL and UIF. The levies are distributed via SETA (Sector Education and Training Authority).
Important : You can claim for training that isn’t given by SETA-accredited companies!
Claiming back from the SDL Levy for expenses incurred in training and skills development and materials
SARA, the South African Award Association maintains that “There is a belief that employers can only claim their levies back when making use of accredited providers. While this is preferable, it is not entirely correct. In the Government Gazette (No. 20865 of 7 February 2000) it is clear that the Skills Development Levies Act provides for recovery of the levy payment based on the submission of Workplace Skills Plans (and) Workplace Skills Implementation Plans (WSIPs). The first two grants, for the submission of a Workplace Skills Plan and for the subsequent implementation report on the training provided, must be paid by the relevant SETA as long as an employer submits the application correctly, on time, as assessed by the appropriate SETA. The regulations refer to these Sector Education and Training Authority as mandatory grants. Discretionary grants may be disbursed by a SETA based on the extent to which providers are facilitating the implementation of the skills plan for the particular sector.”
So, the intention is to reward employers that use accredited providers (because it is the accreditation process that confirms the quality of the education and training on offer). However, for a variety of reasons, we are not there yet – hence, employers are currently being rewarded for simply participating responsibly in the system. “
Download the Seta Sector Skills Plan 2015/16 and update for the period 2015-2020.
Transfer Duty : Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company. Transfer Duty rates apply to all persons (including Companies, Close Corporations and Trusts). All Conveyancers are requested to register with SARS.
Turnover Tax : The turnover tax system replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax for micro businesses with a qualifying annual turnover equal to or less than the current specified amount. A micro business that is registered for turnover tax can, however, elect to remain in the VAT system. Once a business crosses the annual turnover threshold, it may apply to be registered as a VAT vendor, in which case that which was replaced by Turnover Tax will come into effect (e.g. Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax). Turnover tax is available to sole proprietors (individuals), partnerships, close corporations, co-operatives and companies. Public benefit organisations and recreational clubs are not permitted to use the turnover tax system as they also conduct activities other than business activities and already enjoy special tax treatment. A business is disqualified from turnover tax if that business, or any shareholder in that business, holds shares or has any interests in another company or close corporation (although certain exceptions apply). Registered micro businesses are required to submit two interim payments and one final payment on assessment, where necessary. Records of all amounts received and of dividends declared must be kept. You are also required to keep a list of each asset with a cost price of more than the amount specified by SARS at the end of the year of assessment as well as of liabilities exceeding that same amount. Download the Tax Guide.
Taxation Laws Amendment Act 43 of 2014
Unemployment Insurance Fund (UIF) : The UIF gives short-term relief to workers when they become unemployed or are unable to work because of maternity, adoption leave, or illness. It also provides relief to dependents of a deceased contributor. All employees, as well as their employers, are responsible for contributions to the UIF. An employee is excluded from contributing to the UIF under certain conditions including if the person is employed for less than 24 hours a month.
Value Added Tax (VAT) : VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for the government by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT. VAT is charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services. Any person (companies, individuals, partnerships, trust funds, foreign donor funded projects and municipalities) that carries on a business may register for VAT.
In order to register, an application form must be completed and a specific process must be followed, both of which you can find on the page “how to register for VAT.” It is mandatory for a person to register for VAT if the taxable supplies made or to be made are in excess of the specified turnover amount in any consecutive twelve-month period. A vendor is required to submit VAT returns and make payments of the VAT liabilities (or claim a VAT refund) in accordance with the tax period allocated to the vendor. The VAT returns and payments are normally submitted / made on or before the 25th day after the end of the tax period. Late payments of VAT will attract a penalty and interest.
Withholding Tax on Interest (WTI) : WTI is a tax charged on interest paid by any person to or for the benefit of a foreign person (which includes individuals, companies, etc.) from a source within South Africa. The foreign person is responsible for the tax, but it must be withheld by the person making the interest payment or for the benefit of the foreign person.
Withholding Tax on Royalties (WTR) : WTR is due on any amount of royalty paid to or for the benefit of a foreign person from a source within South Africa. The foreign person is liable for the tax, but the tax must be withheld from the royalty payment by the person paying it to the foreign person (i.e. the withholding agent).
A royalty is any amount that is received or accrues in respect of :
- The use, right of use or permission to use any intellectual property,
- Imparting or undertaking to impart any scientific, technical, industrial or commercial knowledge or information,
- Rendering or the undertaking to render any assistance or service in connection with the application or utilization of that knowledge or information.
Consult the SARS Small Business tax kit offerings if you want to :
National Credit Act 34 of 2005
The purpose of the Act is “to :
- promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit and improved standards of consumer information;
- promote black economic empowerment and ownership within the consumer credit industry;
- prohibit certain unfair credit and credit-marketing practices;
- promote responsible credit granting and use and for that purpose to prohibit reckless credit granting;
- provide for debt re-organisation in cases of over-indebtedness;
- regulate credit information; to provide for registration of credit bureaux, credit providers and debt counselling services; to establish national norms and standards relating to consumer credit;
- promote a consistent enforcement framework relating to consumer credit;
- establish the National Credit Regulator and the National Consumer Tribunal;
- repeal the Usury Act, 1968, and the Credit Agreements Act, 1980; and
- provide for related incidental matters.” – Source : www.gov.za
Electronic Communications and Transactions Act 25 of 2002
The purpose of the Act is “to :
- provide for the facilitation and regulation of electronic communications and transactions;
- provide for the development of a national e-strategy for the Republic;
- promote universal access to electronic communications and transactions and the use of electronic transactions by SMMEs
- provide for human resource development in electronic transactions;
- prevent abuse of information systems;
- encourage the use of e-government services; and
- provide for matters connected therewith. – Source : www.gov.za