When considering renting out your property in South Africa, you need to be aware of the tax implications of receiving rental income. There are certain rules and regulations that you must follow to avoid any legal consequences.
This article will provide you with a comprehensive guide on the tax implications of receiving rental income in South Africa.
What is Rental Income?
Rental income is the amount you receive from renting out your property. This income is taxable and must be declared to the South African Revenue Service (SARS).
Rental income can come from various types of properties, such as apartments, houses, holiday homes, or commercial properties. The amount of rental income you receive will depend on several factors, such as location, size, and condition of the property.
Non-compliance with rental income tax obligations can result in penalties, fines, prosecution, and even imprisonment.
How Rental Income is Taxed in South Africa
The rental income you receive is added to your total income for the year and taxed according to the South African income tax brackets. The tax rates for rental income in the country are as follows:
- Income up to R205,900 – no tax
- Income between R205,901 and R321,600 – 26% of the amount above R205,900
- Income between R321,601 and R445,100 – R44,970 + 31% of the amount above R321,600
- Income between R445,101 and R584,200 – R87,382 + 36% of the amount above R445,100
- Income between R584,201 and R744,800 – R140,074 + 39% of the amount above R584,200
- Income above R744,800 – R208,587 + 41% of the amount above R744,800
Deductions for Rental Income
As a property owner, you are entitled to certain deductions that can reduce the taxable amount of rental income. The following expenses can be claimed as deductions:
- Municipal rates and taxes
- Interest on a mortgage bond
- Maintenance and repairs
- Insurance premiums
- Advertising and letting fees
- Depreciation on assets
It’s important to keep all receipts and invoices related to the rental property as proof of expenses.
Registering for Tax
If you receive rental income in South Africa, you are required to register as a taxpayer with SARS. You can register online or visit a SARS branch. Once registered, you will be issued with a tax reference number, which must be used when submitting tax returns.
As a property owner, it’s important to keep accurate records of all income and expenses related to the rental property. This includes rental income received, as well as any expenses incurred for maintenance, repairs, or improvements. It’s recommended that you keep these records for at least five years, as SARS may request them during an audit.
Late Submission and Non-Compliance
Failing to submit your tax returns on time or declaring incorrect information can result in penalties and interest charges. It’s important to submit tax returns on time and ensure that all information provided is accurate and up to date.
Penalties for Non-Compliance
If you fail to register as a taxpayer, submit tax returns, or pay taxes owed, you may face penalties and legal consequences.
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