HEREWITH A BRIEF SUMMARY OF THE VARIOUS TAXES THAT YOU NEED TO BE AWARE OF BEFORE STARTING YOUR BUSINESS :
1. Income Tax
Income tax is the government's main source of income and is levied in terms of the Income Tax Act (1962) as amended.
Income tax is levied on the taxpayers’ world-wide income, excluding income of a capital nature.
Individuals are taxed based on a sliding scale between 18% and 40% after taking certain deductions and exemptions into account.
Companies are taxed on their taxable income at a flat rate of 28%, after taking certain deductions and exemptions taken into account.
Companies classified as small to medium enterprises (SME) are also taxed on a sliding scale at a lower effective tax rate than normal companies.
2. Pay-as-you-earn (PAYE) and Provisional Tax
This is not a separate tax, but the primary method used by SARS to collect income taxes from individuals and companies.
In the case of PAYE the employer is tasked with the collection of taxes on behalf of SARS whereas provisional tax is simply advance payments of your tax liability.
3. Capital Gains Tax (CGT)
CGT was introduced in October 2001. It is calculated on the disposal of assets as defined in the eighth schedule of the Income Tax Act (1962) as amended.
The taxable portion of CGT is included in normal income tax at the inclusion rate of 33% for individuals and 66% for other entities.
4. Value Added Tax (VAT)
This is the government’s second biggest source of income.
VAT is levied at a standard rate of 14% on all goods and services rendered by registered vendors subject to certain exemptions, deductions and adjustments provided for in the VAT Act 89 (1991) as amended.
VAT is also levied on imported goods and services into South Africa. It is levied at the standard rate of 14%, but certain supplies are subject to zero-rate or exempted from VAT.
Since 1 March 2009 a vendor is required to register for VAT if turnover in any twelve-month period is likely to exceed R1 million.
5. Dividend Withholding Tax
Dividend tax is imposed on shareholders at a rate of 15% on receipt of dividends.
Companies are tasked with withholding 15% of the dividend payable to the shareholder.
Dividend tax replaced secondary tax on companies in 1 April 2012.
6. Transfer Duty
Transfer duty is payable by natural persons and legal entities when a property is acquired at progressive marginal rates between 0% and 8%.
No transfer duty is payable if the transactions is subject to VAT.
7. Estate Duty
The duty is calculated at a rate of 20% on the dutiable amount of the estate.
For the purposes of estate duty, an estate consists of all property of the deceased ‒ including deemed property, such as life-insurance policies and payments from pension funds (wherever situated).
The estate of a deceased non-resident consists only of his or her South African assets.
Certain admissible deductions from the total value of the estate are allowed where after an exemption amounting to R3.5 million is taken into account.
8. Skills Development Levy (SDL)
SDL is a compulsory levy scheme for the funding of education and training which is collected by SARS. The rate is 1% of a payroll and payable by employers who are registered with SARS for employees' tax purposes, or employers who have an annual payroll in excess of R500 000.
9. Unemployment Insurance Fund (UIF)
The UIF provides short-term relief to workers when they become unemployed or are unable to work because of maternity or adoption leave or illness.
It also provides relief to the dependants of the deceased contributor in terms of the Unemployment Insurance Act.
The bulk of contributions to the UIF are collected by SARS and then transferred to the fund, which is administered by the Unemployment Insurance Commissioner.
10. Donations Tax
Donations tax is payable on the value of property disposed of by a resident by means of a donation.
Donations tax is calculated at 20% taking into account certain exclusions and exemptions.
Exemptions relating to a natural person is R100 000 and for companies up to R10 000 per year.
11. Compensation for Occupational Injuries and Diseases Act (COID)
Employers make compulsory contributions toward this fund. The fund mainly serves as an insurance policy for employees injured on the job. The Commissioner determines the amount due based on the riskiness of the specific industry.
