South Africa has a complex tax system comprising several different taxes, each with its own rules and regulations. Therefore, understanding the various types of taxes can be daunting. With so many different taxes, it can be challenging to know which ones you need to pay and how much you’re expected to pay.
In this article, we’ll provide a comprehensive guide to the 10 types of tax in South Africa, explaining what they are, who pays them, and how they’re calculated.
1. Personal Income Tax
Personal Income Tax is a tax levied on an individual’s income, including wages, salaries, bonuses, rental income, and other forms of income. It’s a progressive tax, meaning that the more an individual earns, the higher the tax rate they’ll pay. In South Africa, Personal Income Tax rates range from 18% to 45%.
2. Corporate Income Tax
Corporate Income Tax is a tax levied on the profits of companies and close corporations. The corporate tax rate is 28%, with a reduced rate of 0% for small business corporations.
3. Value-Added Tax (VAT)
Value-Added Tax (VAT) is also levied on the sale of goods and services. The current VAT rate in South Africa is 15%, with some goods and services exempt from VAT.
4. Pay-as-you-earn (PAYE) Tax
Pay-as-you-earn (PAYE) Tax is levied on an employee’s income and is deducted by the employer from the employee’s salary each month. The PAYE system is used to collect Personal Income Tax from individuals who earn stable income.
5. Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is a tax levied on the profit made from the sale of an asset, such as property or shares. CGT is levied at a rate of 18% for individuals and 22.4% for companies.
6. Secondary Tax on Companies (STC)
The Secondary Tax on Companies (STC) was a tax levied on dividends paid by companies. This tax was replaced by the Dividend Withholding Tax (DWT) in 2012.
7. Dividend Withholding Tax (DWT)
Dividend Withholding Tax (DWT) is a tax levied on dividends paid by companies to their shareholders. The DWT rate is 20%, but this rate may be reduced under certain circumstances.
8. Estate Duty Tax
This tax is only levied on the assets of a deceased person. The Estate Duty Tax rate is 20% on the value of the estate above R30 million, and 0% on the value of the estate below R3.5 million.
9. Donations Tax
Donations Tax is charged on the value of assets that are donated by one person to another. In South Africa, the Donations Tax rate is 20% on the donation value exceeding R100,000 per tax year. However, certain exemptions to the Donations Tax include donations to public benefit organizations and donations between spouses.
10. Tax on Transfer of Property
Tax on Transfer of Property, also known as Transfer Duty, is a tax payable by the purchaser of a property when ownership of the property is transferred from the seller to the buyer. The Transfer Duty is calculated as a percentage of the value of the property, with the rate varying depending on the value of the property.