Updated on June 27, 2022
Additions to the market are subject to a tax (VAT)
It is important to note that South Africa’s VAT (Value Added Tax) largely affects domestic consumption and imports. The tax is primarily meant to be paid by the final consumer or purchaser in South Africa. Standard and zero rates are only the beginning of the cost structure (0 percent ).
The new standard VAT rate of 15% will take effect on April 1, 2018. the normal rate was 14% before that date).
Few commercial transactions in South Africa are free from the country’s 15% value-added tax (VAT). Businesses registered with SARS as “vendors” collect tax on all taxable supplies along the production and distribution chain. For non-vendor sales and supplies, VAT is not applicable.
VAT registration and administration
All suppliers of goods and services having an annual turnover exceeding ZAR 1 million or which are expected to exceed ZAR 1 million in the next 12 months in terms of a written contractual agreement are required to register as VAT vendors and to charge output tax. Other vendors may elect to register as VAT vendors, provided their annual turnover exceeds ZAR 50,000. Some specific rules apply. Firstly, non-resident suppliers of electronic services are required to register once the value of taxable supplies has exceeded ZAR 1 million in any consecutive 12-month period. Secondly, persons likely to make taxable supplies only after a period of time may register if the activities are of a nature set out in regulations. If they do not register, they are prohibited from charging VAT on goods or services they supply and claiming an input tax (a rebate of VAT paid) on goods and services that they acquire. Lastly, where a person is carrying on an enterprise and the total value of taxable supplies made or to be made by that person has not exceeded ZAR 50,000, but can be reasonably expected to exceed this amount within 12 months from the date of registration, the person may register, subject to the provisions of the relevant regulations.
Under the VAT system, vendors normally pay VAT on expenses (input tax) and charge VAT on supplies made (output tax). This mechanism, therefore, ensures that only the so-called ‘added-value’ is taxed. Due to VAT being a self-assessment system, the output tax collected may be reduced by input tax paid. Thereafter, the net amount is payable to, or refundable by, the SARS. The self-assessment returns are due regularly within prescribed periods (tax periods).
Taxable supplies include both supplies with a standard rating and those with a zero rating. Exempt and non-supplies are the other types of supplies.
Goods and services
When goods or services are supplied or imported, a VAT liability is created. Goods are tangible, movable objects, as well as the legal ownership rights to such objects and property. Any right, facility, or advantage can be granted, assigned, rescinded or surrendered as part of a service’ definition.
All electronic services provided to South African residents by non-residents must be registered for VAT and VAT accounts must be maintained.
Vendors who import goods and services and use or consume them for the purpose of making taxable supplies are exempt from VAT under this rule. As an added bonus, the VAT Act includes a schedule outlining the items imported by vendors and unregistered individuals alike that are not subject to VAT.
There is a list in the VAT Act of supplies that are exempt from taxation. There are a few exceptions, such as the sale of a business as a continuing concern and certain basic consumables, as well as gasoline subject to the fuel levy and presumed supplies by welfare organizations that fall under this exemption.
A vendor’s zero-rated supply is liable to VAT, but the VAT rate is 0%. VAT is not charged on the consideration for zero-rated supplies, and vendors receive a return or credit for the VAT they paid on taxable goods used to make the zero-rated products.
There is also a list of supplies that are not subject to VAT in the VAT Act, in addition to the zero-rated ones mentioned earlier on. However, interest-based financial services are excluded from the VAT. Residential rents, non-international passenger transportation by road or rail, and educational services are among the other commodities that are excluded from tariffs.
Any VAT paid on goods and services used in the making of the exempt supply is neither deductible or creditable in the event of an exempt supply provided by a vendor. As a result, sellers count the VAT they paid but did not receive a deduction or credit for as an additional expense they must recoup in the price they charge to make an exempt supply.
A range of 3-45% of the value of imported products is levied as customs taxes in South Africa. Anti-dumping and countervailing duties of up to 150 percent may also be included in import duties. Trade between South Africa and Botswana, Lesotho, Namibia, and Swaziland is exempt from customs taxes because these five nations are members of the Southern African Customs Union.
The African Continental Free Trade Area (AfCFTA) agreement went into force on January 1, 2021, with the goal of increasing trade within Africa. Negotiation of tariff schedules is required before preferential trade may be implemented.
On certain domestically produced and imported commodities, excise duty is imposed. Tobacco and liquor are taxed at a fixed sum, whereas certain luxury products and automobiles are taxed at a percentage of their price. Excise duty relief is offered for exports and for specific products generated in the course of certain farming, forestry, and (limited) manufacturing operations, such as acorns and hay.
Land is taxed by local governments. Municipal valuations of land and improvements are used to calculate these rates. They vary from municipality to municipality. Commercial real estate typically carries a greater tax burden.
Transfer duty levied on the sale of immovable property is payable by the person acquiring the property within six months from the date of acquisition at the following rates:
|Purchase price (ZAR)||Transfer duty rate|
|Not exceeding 1,000,000||0%|
|1,000,001 to 1,375,000||3% on value above 1,000,000|
|1,375,001 to 1,925,000||11,250 plus 6% on value above 1,375,000|
|1,925,001 to 2,475,000||44,250 plus 8% on value above 1,925,000|
|2,475,001 to 11,000,000||88,250 plus 11% on value above 2,475,000|
|Exceeding 11,000,000||1,026,000 plus 13% on value above 11,000,000|
Transfers of immovable property subject to VAT are exempt from transfer duty.
Securities transfer tax (STT)
Transfers of securities are subject to STT, which is assessed at a rate of 0.25 percent of the taxable value. If the declared consideration is less than the market value, or if no consideration was paid, the taxable amount is the market value of the security. The entity issuing the securities is responsible for paying the STT. But the corporation can recoup the tax from the new shareholder. Listed securities have slightly different rules.
Pay-as-you-earn (PAYE) withholding is the responsibility of employers on behalf of their workers. SARS collects PAYE on a monthly basis, based on an employee’s salary. The rates are dependent on the salary of the employee.
Skills Development Levy (SDL)
SDL is a mandatory fee that helps to fund education and training programs. Employers are responsible for paying it, and employees are not allowed to deduct it from their wages. The fee does not apply to small businesses with a payroll of less than ZAR 500,000 per year. A 1% SDL tax is charged on each employee’s salary. The income tax that has been deducted from employees’ paychecks is also included in the monthly payment.
Unemployment Insurance Fund (UIF) contributions
On a per-employee basis, employers must contribute to the UIF on their behalf. Contributions are capped at ZAR 177.12 per month per employee and are based on 1% of total compensation. The employee is responsible for paying and withholding an additional 1%, which is subject to the same cap.
Compensation for Occupational Injuries and Diseases Act (COIDA) fund
Annual contributions to the COIDA fund must be made by employers. There is a salary cap of ZAR 506,473 per year per employee for COIDA contributions as a payroll item that cannot be removed. The cost of health insurance varies by business.
Donations are taxed when assets are given away for less than their fair market value. If the value of the donated property does not exceed ZAR 30 million, a donation tax of 20% is due, and if the value of the donated property exceeds ZAR 30 million, a 25% donation tax is due. Companies can claim a yearly exemption of ZAR 10,000.
Donations to public enterprises, the majority of which are publicly traded, are exempt from tax. Donations to select charities and non-profit organizations are also exempt from federal taxation.
Vehicle emissions tax
There is a ZAR 132 environmental tax on new passenger cars over the first 120g of CO2 produced per kilometer, and a ZAR 176 environmental tax over the first 175g of CO2 produced per kilometer, on CO2 emissions (in the case of double cab passenger vehicles). Prices are effective as of April 1, 2022.
The cost of petroleum gasoline includes a charge. Petrol and diesel will cost 385 cents and 370 cents, respectively, per liter in general in 2022/23. A carbon tax of 9 cents per liter (petrol) and 10 cents per liter (diesel) will go into effect on April 6, 2022. Certain businesses, including as agriculture, fishing, and mining, are eligible for a reimbursement of the diesel general fuel levy.
The government has implemented a 3.5-cent-per-kilowatt-hour tax on electricity generated from nonrenewable sources to promote energy efficiency. The electricity generator is responsible for paying the tax, which is then recouped by the consumer through the price they pay for their electricity.
A tire levy is applicable at a rate of ZAR 2.30/kg.
The Health Promotion Levy on Sugary Beverages was implemented on April 1st, 2018, and it is a tax on sugar-sweetened beverages. The levy is based on the amount of sugar in the beverage. As of 1 April 2022, the levy rate for sugar content in excess of 4g/100ml is 2.31 cents per gram. The overall volume of the beverage is taken into account when calculating the sugar content of powder and liquid concentrates.
Air passenger tax
For flights to Botswana, Lesotho, Namibia, and Swaziland, the air passenger tax is ZAR 100; for all other destinations, the cost is ZAR 190. The tax is included in the ticket price.
Entities with’scope 1′ greenhouse gas (GHG) emissions surpassing a particular threshold will be subject to a carbon tax beginning on June 1, 2019. Thermal capacity of 10MW is generally accepted as the cutoff point, however the exact value depends on the activity carried out by the organization.
For a tax period, a tax is charged on the total GHG emissions of a taxpayer (i.e. every calendar year, with the exception of the first tax period, which commenced on 1 June 2019 and ended on 31 December 2019).
Scope 1 GHG emissions typically consist of emissions from sources that are owned or controlled by the emitter (as opposed to scope 2 or 3 GHG emissions, which are indirect emissions).
ZAR 144 per ton of CO2 equivalent emissions is the tax rate for carbon tax in 2022.
Tax-free allowances are offered to decrease the tax burden on carbon emissions to 95% or less. The effective tax rate ranges from 5% to 40% of the statutory rate when allowances are taken into account.
In July of the year following the appropriate tax period, taxpayers must file carbon tax returns and pay any carbon tax due.
First phase of a carbon tax will be extended for three years from 1 January 2023 to 31 December 2025 in the February 2022 Budget. Companies will continue to benefit from the first phase’s transitional support measures (such as tax-free allowances and revenue-recycling measures) during this time. Emissions exceeding obligatory carbon targets (starting January 1, 2023) will be penalized at a much higher tax rate in the 2022 budget.