Income tax is the government’s main source of income and is levied in terms of the Income Tax Act, 1962.
Income tax is levied on a South African residents’ worldwide income, with appropriate relief to avoid double taxation. Non South African residents are taxed on their income from a South African source. Tax is levied on taxable income; which in essence consists of the gross income less exemptions and allowable deductions as per the Income Tax Act.
In respect of the 2011 year of assessment, companies are taxed at a rate of 28%. In addition to this, secondary tax (STC) is also levied on companies at a rate of 10% on all income distributed by way of dividends. For Gold mining companies a specific tax formula applies.
Small-business corporations with an annual turnover of less than R14-million benefit from a graduated tax rate of 0% on the first R57 000 taxable income, 10% from R57 001 to R300 000 taxable income; and R24 300 + 28% in excess of R300 000 taxable income. These corporations can also write off certain investment expenditure in the year in which it is incurred.
Value Added Tax (VAT)
Value Added Tax (VAT) is levied at a standard rate of 14% on all goods and services subject to certain exceptions, exemptions, exceptions, adjustments and deductions provided for in the amended VAT Act 89 of 1991.
VAT is levied on the supply of all goods and services rendered by registered vendors for all business operations. It is the government’s second biggest source of income. VAT is also levied on the importation of goods and services into South Africa. It is levied at the standard rate of 14%, but certain supplies are subject to a rate of zero or are exempt from VAT.
Capital Gains Tax
In October 2001, Capital Gains Tax (CGT) was introduced. It forms part of the income tax system and includes taxable income capital gains that are made on the disposal of assets.
Excise duty is levied on certain locally manufactured goods as well as on their imported equivalents. This duty is specifically levied on tobacco and liquor, televisions, audio equipment, motor cars and as an ad valorem duty on cosmetics,
Relief from Excise duty is available on specific farming, forestry and certain manufacturing activities. Relief is also available where excisable products are exported.
Transfer duty is payable by individuals when they acquire property at progressive marginal rates that range between 0% and 8%. When property is not acquired by an individual, but an entity such as a company or trust, transfer duty is payable at a rate of 8%. All transactions relating to the taxable supply of goods that are subject to VAT are exempt from transfer duty.
For the purposes of estate duty, an estate consists of all property of the deceased; which includes deemed property, such as life-insurance policies and payments from pension funds, wherever they may be situated. However, the estate of a deceased non-resident consists only of his or her South African assets. The duty, at a rate of 20%, is calculated on the dutiable amount of the estate. There are certain admissible deductions from the total value of the estate are allowed.
Effected from 1 April 2009, the he Stamp Duties Act of 1968 as been repealed. No stamp duty is liable on leases of fixed property executed on or after that date. If a lease agreement was executed before 1 April 2009, stamp duty is still levied on leases of fixed property.
Uncertified Securities Tax
Uncertified Securities Tax is payable in respect of the issue and change in beneficial ownership of any securities that are transferable without a written instrument and are not evidenced by a certificate; and if the issue and change in beneficial ownership took place prior to 1 July 2008. It is levied at a rate of 0,25%. The Uncertified Securities Tax Act of1998 was replaced by the Securities Transfer Tax Act from 2007; and therefore provisions are applicable in respect of every transfer of any security on or after 1 July 2008.
Skills Development Levy (SDL)
The Skills Development Levy is a compulsory levy scheme for the funding of education and training. SARS administers its collection. The rate is 1% of a payroll and is payable by employers who are registered with SARS for employees’ tax purposes, or employers who have an annual payroll in excess of R250 000. As from 1 August 2005, the amount of R250 000 has increased to R500 000.
Unemployment Insurance Fund (UIF)
The Unemployment Insurance Fund (UIF) provides short-term relief to workers if 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 is collected by SARS and is transferred to the fund, which is administered by the unemployment insurance commissioner.
Air passenger tax
Fee-paying passengers departing on international flights pay a tax of R110 (R120 which was effective from 1 August 2005) and passengers flying to Botswana, Lesotho, Namibia and Swaziland pay R55 (R60 which was effective from 1 August 2005).
Donations Tax is tax payable on the value of property disposed of by a resident by means of a donation. Donations tax is levied at a flat rate of 20% on the value of the property donated.
Retirement Funds Tax (RFT)
The Tax on Retirement Funds Act, 1996 (Act No. 38 of 1996) has been repealed with effect from 1 March 2007.
Other taxes include provincial gaming taxes. Local governments also finance the cost of municipal services by levying rates on the value of fixed property.