Calculating your income tax in South Africa
You may be liable to pay South African income tax as an expat; this guide covers the SARS income tax system, income tax brackets for South Africa, deadlines, allowances and income tax calculators for South Africa.
South Africa income tax is governed by the Income Tax Act South Africa and collected by the South African Revenue Service (SARS). All residents living and working in South Africa are typically liable to pay income tax in South Africa, although how much SARS income tax you must pay depends on your tax residency status and earning amount.
South African income tax is levied on residents' worldwide income, with appropriate relief to avoid double taxation for certain foreigners, plus exemptions and allowable deductions as per the Act. Non-residents, however, are only taxed on their income from South African sources.
This detailed guide covers the main aspects of individual income tax in South Africa, including who must pay South African income tax, income tax brackets, SARS income tax deadlines, income tax deductions and allowances, SARS income tax calculators and how to fill out your South African tax return.
Who has to pay income tax in South Africa?
South Africa operates on a residency-based taxation system, meaning that residents (whether permanent or temporary) pay tax on their worldwide incomes. Residents are those with citizenship or residence permits, but you are also considered a resident for tax purposes if you have been living in South Africa for more than 91 days in total in each of the last five tax years, or at least 915 days in total across those five years. Find out your tax residency status in South Africa in our guide to tax in South Africa.
Those classified as non-residents will pay South African income tax only on income earned inside the country.
Tax is collected by the South African Revenue Service (SARS) and working residents must obtain a SARS income tax number and submit an annual South African tax return.
What earnings are subject to SARS income tax?
Income tax in South Africa includes individual and business income tax. Business or corporate income tax in South Africa is dealt with separately in our article here.
SARS income tax applies to the following type of earnings:
- employment income including salaries, bonuses, overtime and taxable benefits and allowances (in most cases deducted from wage payments by employers through a pay-as-you-earn or PAYE scheme)
- profits or losses from a business or self-employed trade
- director's fees
- rental income
- investment income such as interest or dividends
- pension income (excluding foreign pensions)
- certain capital gains
There is also an additional dividends tax in South Africa imposed on dividends payments to shareholders at the rate of 15 percent. This is a separate tax that is withheld from the dividend payment by the company making the payment.
Income tax brackets South Africa
Income tax brackets in South Africa are progressive like elsewhere, where you pay a higher income tax rate the more you earn.
The income tax brackets South Africa for 2017 are listed below.
- Up to ZAR 188,000: 18 percent of taxable income
- ZAR 188,001–293,600: 26 percent (ZAR 33,840 plus 26 percent of taxable income above ZAR 188,000)
- ZAR 293,601–406,400: 31 percent (ZAR 61,296 plus 31 percent of taxable income above ZAR 293,600)
- ZAR 406,401–550,100: 36 percent (ZAR 96,264 plus 36 percent of taxable income above ZAR 406,400)
- ZAR 550,101–701,300: 39 percent (ZAR 147,996 plus 39 percent of taxable income above ZAR 550,000)
- ZAR 701,301+: 41 percent (ZAR 206,964 plus 41 percent of taxable income above ZAR 701,300)
The are different income thresholds for certain age groups, up to which earnings are exempt from SARS income tax on. These are currently:
- ZAR 75,000 for those under 65 years
- ZAR 116,150 for those aged 65–74 years
- ZAR 129,850 for those aged 75 years and over.
Filing your South African income tax return
The South African tax year runs from 1 March to 28/29 February. The tax season, when people are required to file their income tax returns, is July to November. The deadlines for submitting income tax return forms in South Africa for the 2015/16 tax year are as follows:
- 25 November 2016: at a SARS branch (provisional and non-provisional)
- 25 November 2016: SARS eFiling (non-provisional)
- 31 January 2017: provisional taxpayers via eFiling
If you are employed in South Africa, your employer will deduct your SARS income tax contributions from your salary, but you will still need to complete an annual South African income tax return. The only exemptions are for those earning under ZAR 350,000 gross salary from a single employer and who have no additional sources of income or deductions they want to claim. Read Expatica's guide on social security in South Africa to find which tax contributions are deducted from your salary.
Those receiving income other than employment salary are liable to pay their tax via the South African provisional tax system. This is done in order to spread the tax liability across the year. The taxpayer will pay two upfront installments during the year, based on estimated taxable income. The final balance owed will then be submitted along with the tax return form.
Those submitting a late South African income tax return or making a late payment will be liable for an admin penalty, which is outlined by the SARS income tax authority here.
South African income tax allowances and deductions
Certain forms of income are exempt from tax in South Africa. These are set out in Section 10 of the 1962 Income Tax Act South Africa. There is also an annual South African income tax rebate of ZAR 13,500 for individuals, while those aged 65–74 receive ZAR 7,407 and those who are 75 years and over receive ZAR 2,466.
Tax residents can make the following deductions from their taxable income in South Africa:
- Tax threshold allowance of ZAR 75,000 (ZAR 116,150 for those aged 65–74 and ZAR 129,850 for those aged 75 and over).
- Medical tax credit of ZAR 286 per month (plus ZAR 286 per month for the first dependant and ZAR 192 per month for each additional dependant).
- Exemption on interest payments up to ZAR 23,800 (ZAR 34,500 for those aged 65 and over).
- Tax relief on retirement lump sum benefits up to a total of ZAR 500,000 across a lifetime.
- Tax relief claims against work-related travel and vehicle allowance.
- A tax-free allowance for settling in costs up to one month's basic salary for relocation costs may be provided in some cases where an employee and his/her family are relocated to South Africa for employment purposes.
South African income tax for foreigners
Foreign residents pay the same income tax in South Africa as local citizens, however, those who classed as non-resident taxpayers are only taxed on income earned in South Africa, and not worldwide.
For both South African residents and non-residents, there is no tax on overseas pensions in South Africa. However, those retiring to South Africa who are receiving a South African pension will be liable to pay tax on annual earnings above ZAR 116,500, and at least the minimum 18 percent tax on lump sum payments above ZAR 500,000. Read more about taxes and retirement in South Africa here.
South Africa has tax treaties with Australia, Japan, UK, US, Thailand and Sweden. These have been set up to help ensure that individuals moving from one country to another don't have to pay 'double taxation' on income earned in their home country. Here is a list of countries that have tax treaties with South Africa.
How to fill in a South African tax return
You will first need to be registered as a South African taxpayer and have a SARS income tax number. This will typically be done by your employer, otherwise, read how to join South African social security.
Once you have your SARS income tax number, you can complete your tax return on paper or online. You can obtain a paper copy of the form from your local SARS office. To complete a South African tax return online, you will need to register for eFiling which you can do here.
The South African income tax return for individuals is called form ITR12. To complete the ITR12 form, you will need:
- your bank statements
- information on all forms of income and allowances/deductions you are including in the form
- your tax number
- your employee tax certificate (IRP5/IT3a) if applicable
- certificates (IT3b) for any investment income
- medical aid certificate for details of contributions made that do not appear on your IRP5/IT3a certificate
Income tax calculators South Africa
Using an income tax calculator in South Africa will help you calculate the amount of South African income tax you have to pay. Doing an online search for 'SARS income tax calculator' turns up several webpages offering tools, not limited to:
In place of using a SARS income tax calculator, you can also work it out using the following simple steps:
- Determine gross income: calculate all forms of taxable income and any employment-related benefits and allowances (worldwide income for South African tax residents, or income earned inside South Africa only for non-residents).
- Deduct any forms of exempt income as detailed in Section 10 of the 1962 Income Tax Act South Africa.
- Deduct all allowances and deductions to calculate you your taxable income.
- Multiply your taxable income by your tax rate, depending on your tax bracket.
- Subtract any rebates owed: the annual rebate plus any rebates from overpayments in past years, or applicable rebates for foreign taxes allowed by double-taxation agreements
Once your ITR12 has been assessed by SARS, you will receive a Notice of Assessment (ITA34) that will detail any outstanding tax that needs to be paid. A guide on how to complete your ITR12 form can be found on the SARS website here.
Appealing your income tax assessment
If you are not happy with the income tax assessment made by SARS, you can appeal the decision by filing a dispute. Details on how to appeal a decision can be found on the SARS website.
South African income tax advice
- South African Revenue Service (SARS) website.
- SARS online tool helps you find out if you need to pay South African income tax.
- List of tax deductions in South Africa.
- SARS holds free tax workshops at most of their brances between January and March, where you can see advice on filing your South African income tax return.
- UK government guide on South African income tax for expats.
- It's important to be aware of potential scams asking for your personal information; SARS will never request your banking details in any form of communication, such as post, email or SMS. Only for the purpose of telephone calls and authentication purposes, SARS will ask for your personal details. Importantly, SARS never hyperlink to other websites online, even those of banks, so be aware if you are asked to leave SARS website if filing online.
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