South Africa Tax Guide

Transcription

1 Tax Guide 2012

2 foreword A country s tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. This handy reference guide provides clients and professional practitioners with comprehensive tax and business information for 100 countries throughout the world. As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all tax experts within PFK member firms who gave up their time to contribute the vital information on their country s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Kaarji Vaughan, PKF Melbourne for co-ordinating and checking the entries from countries within their regions. The WWTG continues to expand each year reflecting both the growth of the PKF network and the strength of the tax capability offered by member firms throughout the world. I hope that the combination of the WWTG and assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business. Jon Hills PKF (UK) LLP Chairman, PKF International Tax Committee jon.hills@uk.pkf.com I

3 important disclaimer This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. II

4 preface The (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of 100 of the world s most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current as of 30 September 2011, while also noting imminent changes where necessary. On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at PKF INTERNATIONAL LIMITED APRIL 2012 PKF INTERNATIONAL LIMITED ALL RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION III

5 about pkf international limited PKF International Limited (PKFI) administers the PKF network of legally independent member firms. There are around 300 member firms and correspondents in 440 locations in around 125 countries providing accounting and business advisory services. PKFI member firms employ around 2,200 partners and more than 21,400 staff. PKFI is the 10th largest global accountancy network and its member firms have $2.6 billion aggregate fee income (year end June 2011). The network is a member of the Forum of Firms, an organisation dedicated to consistent and high quality standards of financial reporting and auditing practices worldwide. Services provided by member firms include: Assurance & Advisory Corporate Finance Financial Planning Forensic Accounting Hotel Consultancy Insolvency Corporate & Personal IT Consultancy Management Consultancy Taxation PKF member firms are organised into five geographical regions covering Africa; Latin America; Asia Pacific; Europe, the Middle East & India (EMEI); and North America & the Caribbean. Each region elects representatives to the board of PKF International Limited which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy, insolvency and business development committees work together to improve quality standards, develop initiatives and share knowledge and best practice cross the network. Please visit for more information. IV

6 structure of country descriptions a. taxes payable FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES b. determination of taxable income CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCED INCOME INCENTIVES c. foreign tax relief d. corporate Groups e. related party transactions f. withholding tax G. exchange control H. personal tax i. treaty and non-treaty withholding tax rates V

7 international time Zones AT 12 NOON, GREENwICH MEAN TIME, THE standard TIME ELsEwHERE Is: A Algeria pm Angola pm Argentina am Australia - Melbourne pm Sydney pm Adelaide pm Perth pm Austria pm B Bahamas am Bahrain pm Belgium pm Belize am Bermuda am Brazil am British Virgin Islands am C Canada - Toronto am Winnipeg am Calgary am Vancouver am Cayman Islands am Chile am China - Beijing pm Colombia am Croatia pm Cyprus pm Czech Republic pm D Denmark pm Dominican Republic am E Ecuador am Egypt pm El Salvador am Estonia pm F Fiji midnight Finland pm France pm Guernsey noon Guyana am H Hong Kong pm Hungary pm I India pm Indonesia pm Ireland noon Isle of Man noon Israel pm Italy pm J Jamaica am Japan pm Jersey noon Jordan pm K Kazakhstan pm Kenya pm Korea pm Kuwait pm L Latvia pm Lebanon pm Liberia noon Luxembourg pm M Malaysia pm Malta pm Mauritius pm Mexico am Morocco noon N Namibia pm Netherlands (The) pm New Zealand midnight Nigeria pm Norway pm O Oman pm G Gambia (The) noon Georgia pm Germany pm Ghana noon Greece pm Grenada am Guatemala am P Panama am Papua New Guinea pm Peru am Philippines pm Poland pm Portugal pm Puerto Rico am VI

8 Q Qatar am R Romania pm Russia - Moscow pm St Petersburg pm s Sierra Leone noon Singapore pm Slovak Republic pm Slovenia pm South Africa pm Spain pm Sweden pm Switzerland pm T Taiwan pm Thailand pm Tunisia noon Turkey pm Turks and Caicos Islands am U Uganda pm Ukraine pm United Arab Emirates pm United Kingdom (GMT) 12 noon United States of America - New York City am Washington, D.C am Chicago am Houston am Denver am Los Angeles am San Francisco am Uruguay am V Venezuela am Vietnam pm VII

9 south africa Currency: Rand Dial Code To: 27 Dial Code Out: 00 (R) Member Firm: City: Name: Contact Information: Johannesburg Eugene du Plessis Cape Town Mike Betts Durban Paul Gering a. taxes payable FEDERAL TAxEs AND LEVIEs COMPANy TAx A company is resident in South Africa (SA) if it is incorporated, formed or established in SA or has its place of effective management (day to day management) in SA. Subject to certain limited exemptions, South African resident companies and close corporations (companies) are taxed on their worldwide income. Furthermore, and again subject to certain exemptions, the international anti-avoidance practice of taxing income earned by Controlled Foreign Entities (CFCs) applies to South African residents. Normal tax is payable by South African companies on their worldwide taxable income at the rate of 28%. The tax is payable by both public and private companies as well as close corporations. Small business corporations are close corporations and private companies with only natural persons as shareholders, gross income of less than R14 million during a year of assessment, and where not more than 20% of its gross income consists of investment income or income from the rendering of a personal service. These corporations qualify for taxation at the following rates of tax: Taxable income Rates of tax R0 59,750 Nil R59,750 R300,000 10% of the amount over R59,750 R300,001 + R24, % of the amount over R300,000 Life assurers are taxed according to the four fund approach. The taxable income of what is known as The Individual Policyholder Fund is taxed at 30%. The Company Policyholder Fund and The Corporate Fund are taxed at 28%. Retirement Fund s receipts and accruals are exempt from tax. Mining companies are, in addition to their specific corporate rates of tax, subject to a royalty calculated on the gross sales relating to the transfer of mineral resources. The royalty is calculated in terms of a specific formula and depending on whether refined or unrefined minerals are transferred can range from 0.5% to 7%. TRUsTs South African trusts pay tax at a flat rate of 40% on each Rand of taxable income. Notwithstanding the aforementioned, special provisions apply to testamentary trusts (for so long as the beneficiaries remain minors under the age of 21 years) and trusts created for the benefit of mentally or physically challenged persons. These trusts pay tax at rates applicable to resident individuals. Founders and donors of trusts may be taxed on income earned by the trust in terms of certain attribution rules (deeming provisions). The same can apply to beneficiaries of non-resident trusts in certain circumstances. CAPITAL GAINs TAx (CGT) CGT was introduced with effect from 1 October South African residents are taxed on their worldwide assets while non-residents are only subject to CGT on any direct or indirect interest or right in or to immovable property situated in SA, and assets of a permanent establishment through which they carry on a trade in SA. 1

10 CGT is triggered on the disposal or deemed disposal of an asset which includes but is not limited to any event, act, forbearance or operation of law that results in the creation, variation, transfer or extinction of an asset. A noteworthy deemed disposal arises on emigration from SA or termination of SA tax residence. CGT not only affects assets purchased and sold after 1 October 2001 but it also affects assets acquired prior to this date and disposed of thereafter. In the case of assets acquired prior to 1 October 2001 and disposed of subsequent thereto, the gain is calculated based on the growth in value after 1 October 2001 which, of necessity, has resulted in legislation providing for complex alternatives to determine the gain at the time of disposal. Strictly speaking, CGT is not a tax in its own right but rather forms an integral part of South Africa s income tax legislation. In short, subject to any exclusions and exemptions, a taxable gain is calculated by taking the difference between the proceeds received on disposal of the asset and the base cost and then multiplying this amount by an inclusion factor (which varies depending on the nature of the taxpayer). The resultant sum is then added to the taxpayer s normal taxable income and taxed accordingly. A capital loss results where the base costs exceed the proceeds on disposal. Capital losses are however ring-fenced and may not be set off against a taxpayer s taxable income from revenue sources but maybe set-off against capital gains, with any excess capital losses carried forward for set off against any capital gains arising in subsequent years of assessment. A summary of some of the more relevant inclusion rates and effective rates are set out below: Nature of taxpayer Inclusion rate Maximum tax rate Effective rate Company/close corporation 50% 28% 14% Natural person 25% 40% 0% to10% Trust 50% 40% 20% BRANCH PROFITs TAx Where a branch of a foreign company operates in South Africa, a branch profits tax at the rate of 33% of taxable income applies. However, such companies are exempt from STC. secondary TAx ON COMPANIEs (stc) Dividends received prior to 1 April 2012 are exempt from tax in the recipient s hands. However, STC is charged at the rate of 10% ondividends declared by a company prior to 1 April STC is payable by the company over and above the normal tax imposed on companies. Dividends received, which have already been subject to STC, can be set off against the dividend declared and STC is payable on the net dividend. Only certain exempt foreign dividends will qualify as dividends accrued for purposes of the determination of STC. STC will to be replaced by a dividend withholding tax from 1 April From this date a company declaring a cash dividend would no longer be liable for STC but would be obliged to withhold tax on behalf of shareholders who are entitled to the dividends. This is in line with international tax practices and it provides non-resident shareholders with the ability to claim tax credits in respect of taxes withheld in accordance with double taxation agreements. VALUE ADDED TAx (VAT) VAT is imposed on all goods and services supplied by a vendor at 14%. Exports are zero-rated and very few exemptions exist.compulsory VAT registration is triggered when the value of taxable supplies in a 12 month period exceeds or is expected to exceed R1 million. FRINGE BENEFIT TAx Employees are taxed on the value of fringe benefits as determined in accordance with a separate schedule to the Income Tax Act. The tax levied is in accordance with the tax rates applicable to natural persons. DONATIONs TAx Subject to certain exemptions, donations tax is levied at the rate of 20% on the value of any property disposed of under any donation (or deemed donation) made by a natural person, company, municipality or trust resident for tax purposes in SA. 2

11 securities TRANsFER TAx With effect from 1 July 2008, securities transfer tax is levied on every transfer of a security. A security in essence means any share in a company, member s interest in a close corporation or any right or entitlement to receive any distribution from a company or close corporation. Only securities issued by companies incorporated, established or formed inside SA and companies incorporated, established or formed outside SA, which are listed on a South African exchange, are taxable. The tax rate is 0.25% and is applied to the taxable amount in respect of any transfer of a security. TRANsFER DUTy Transfer duty is imposed on the transfer of immovable property at the following rates: On the first R600,000 0% For R600,000 to R1,000,000 3% on the value above R500,000 For R1,000,000 to R1,500,000 R12, % on the value above R1,000,000 R1,500,001 and above R37, % on the value above R1,500,000 other taxes These include, amongst others, customs and excise duties, and skills development levies. b. determination of taxable income The taxable income of a company is determined by deducting expenditure incurred in the production of income and other allowable expenses and allowances from the company s income. Capital receipts are subject to CGT with effect from 1 October ALLOwANCEs/PLANT, MACHINERy AND EQUIPMENT UsED IN MANUFACTURE Asset Type Industrial buildings or improvements and buildings used for research and development Conditions for annual allowance Construction of buildings or improvements on or after 1 January 1989, provided building is used wholly or mainly for carrying on process of manufacture or similar or research and development. Annual Allowance 5% of cost (previously 2%) (Note 3) New commercial buildings (other than residential accommodation) (Note 1) Building in an Urban Development Zone Hotel Buildings Construction of buildings or improvements on or after 1 July 1996 to 10 September 1999 and the buildings or improvements are bought into use before 31 March 2000 and used in the process of manufacture or similar process. Any cost incurred in erecting any new and unused building, or improving an existing building on or after 1 April 2007 wholly or mainly used for the purpose of producing income in the course of trade. Costs incurred in erecting or extending a building in respect of demolishing, excavating the land, or to provide water, power or parking, drainage or security, waste disposal or access to the building improvement to existing buildings. Construction of buildings or improvements, provided used in trade as hotelkeeper. 10% of cost (Note 3) 5% of cost 20% in first year 8% in each of the 10 subsequent years 5% of cost Hotel equipment Refurbishments (Note 2) which commenced on or after 17 March Machinery, implements, utensils or articles bought into use on or after 16 December % of cost 20% of cost 3

12 Asset Type Conditions for annual allowance Annual Allowance Aircraft Acquired on or after 1 April % of cost (Note 3) Farming equipment Ships Plant and Machinery Plant and Machinery (small business corporations only) Nonmanufacturing assets (small business corporation only) Licences Communication lines and cables Environmental treatment and recycling asset and improvements Environmental waste disposal asset and improvements thereto Machinery, implements, utensils or articles (other than livestock) bought into use on or after 1 July Biodiesel plant and machinery bought into use after 1 April South African registered ships used for prospecting, mining or as a foreign-going ship, acquired on or after 1 April New and unused manufacturing assets acquired on or after 1 March 2002 will be subject to wear and tear allowances over 4 years. New and unused plant and machinery bought into use on or after 1 April 2001 and used by the taxpayer directly in the process of manufacture. Acquired on or after 1 April Expenditure, other than for infrastructure to acquire a licence from government body to carry on telecommunication services, exploration, production or distribution of petroleum or the provision of gambling facilities. Acquiring electronic communication lines or cables for direct joint ownership. Premium in respect of an indefeasible right of use (IRU) Any new and unused air, water and solid waste treatment and recycling plant or pollution control and monitoring equipment used in the course of the taxpayer s trade and required by law of the Republic. Any new and unused air, water, and solid waste disposal site, dam, dump, reservoir, or other structure of a similar nature of a permanent nature, used in the course of the taxpayer s trade and required by the law of the Republic. 50% in first year 30% in second year 20% in third year 20% of cost (Note 3) 40% in first year 20% in each of the 3 subsequent years (Note 4) 100% of cost 50% in first year 30% in second year 20% in third year Evenly over the period of the licence, subject to a maximum of 30 years 5% of cost Period of use (IRU must have a legal term of at least 20 years) 40% in first year 20% in each of the three subsequent years 5% of cost Notes: 1. Allowances available to owners as users of the building or as lessors/financiers. 2. Refurbishment is defined as any work undertaken within the existing building framework. 3. Recoupment of allowances can be deducted from the cost of the replacement asset. 4. Where plant and machinery is used in a process of manufacture or similar process, the taxpayer is obliged to make use of the allowances and not the wear and tear rates. 5. Where assets have been acquired from connected persons, the cost on which the allowance is based may be limited, generally to the lesser of the original cost to the seller or the market value. CERTIFIED EMIssION REDUCTIONs Income received by a person disposing of credit emission reductions (CERs) emanating from Clean Development Mechanism (CDM) projects as envisaged in the Kyoto Protocol, will be wholly exempt from income tax and capital gains tax.this exemption includes in specie distributions and applies in respect of CERs disposals on or after 11 February As CERs will, by default, be exported, they will be zero-rated for VAT purposes. stock INVENTORy All trading stock on hand at the end of the tax year must be added to income while all trading stock on hand at the beginning of the year ranks as a deduction. Trading 4

13 stock is valued at the lesser of cost or net realisable value. Consumable stores and work-in-progress on hand constitute trading stock. The LIFO method of valuing trading stock is not permitted in respect of years of assessment commencing on or after 1 July REsEARCH AND DEVELOPMENT ExPENDITURE (R&D) Qualifying expenditure incurred to undertake research and development activities in SA is deductible in full. Certain expenses qualify for an additional deduction equal to 50% of the actual expense incurred. The additional 50% deduction is subject to an application for approval being made to the department of Science and Technology. Plant and machinery used for research and development qualify to be written off over four years (40:20:20:20) while buildings used for research and development activities qualify for a 5% annual allowance. INTELLECTUAL PROPERTy Where the expenditure was incurred before 29 October 1999, the deduction is allowed over the number of years of the duration of use or 4% of the expenditure, whichever is greater. Where the expenditure was incurred on or after 29 October 1999 and exceeds R5,000, the annual deduction is limited to: 5% of the expenditure in the case of an invention, patent, copyright, knowledge or other property of a similar nature 10% of the expenditure in the case of a design or other property of a similar nature. No allowance is allowed in respect of any expenditure incurred on or after 29 October 1999 in respect of the acquisition of any trademark or property of a similar nature. INTEREsT AND FINANCE CHARGEs Interest incurred in the production of income is a deductible expense. Where the loan or instrument in respect of which interest is incurred complies with certain requirements, such interest is deemed to be incurred on a day-to-day basis. Interest incurred prior to the commencement of traded is deductible in the year in which trade commences. TAx LOssEs Subject to certain anti-avoidance provisions, tax losses are carried forward to the following year provided the trading activity is perpetuated and income is derived from that trade. For natural persons, tax losses from secondary trades are ring-fenced in certain circumstances. INTEREsT RECEIVED Interest received (or accrued) is included in gross income. Where the loan or instrument in respect of which interest is received complies with certain requirements, such interest is deemed to accrue on a day-to-day basis. FOREIGN sourced INCOME South African resident individuals and Corporates are subject to tax in SA on their worldwide income. However, this general principle may be overridden by the provisions of a double taxation agreement or certain unilateral relief provisions contained in South African tax legislation. Foreign dividends i.e. dividends paid or payable by a foreign company in respect of a share in that company and dividends paid by a headquarter company, are taxable subject to certain exemptions. The taxation of foreign dividends will be brought in line with the taxation of local dividends resulting in maximum rate of tax liable on foreign dividends being restricted to 10%. This will apply from 1 March 2012 for individuals and trusts and for companies from years of assessment commencing on or after 1 April INCENTIVEs The Department of Trade and Industry provides an additional industrial investment allowance for qualifying industrial assets and projects. No tax holiday scheme is in force. REGIONAL HEADQUARTER COMPANy AND INVEsTMENT FUND REGIMEs A headquarter company regime applies from years of assessment commencing on or after 1 January Qualifying criteria for a headquarter company are: For the duration of the year of assessment and of all previous years of assessment of the company each shareholder of the headquarter company must have held at least 10% of the headquarter company s equity shares and voting rights 5

14 At the end of the year of assessment and of all previous years of assessment of that company, 80% or more of the cost of the total assets of the company was attributable to one or more of the following: - any interest in equity shares in - any amount loaned or advanced to or - any intellectual property that is licensed by the company to any foreign company in which that company (whether alone or together with any other company forming part of the same group of companies as that company) held at least 10% of the equity shares and voting rights (qualifying investments) Where the gross income of that company for that year of assessment exceeds R5 million, 50% or more of that gross income consisted of amounts in the form of one or both of the following: - any dividend, interest, royalty or fee paid or payable by any foreign company that constitutes a qualifying investment; or - any proceeds from the disposal of any interest in a foreign company or in intellectual property licensed to a foreign company that constitutes a qualifying investment, and The company elects to be classified as a headquarter company. The SA tax implications of qualifying as a headquarter company are: The company is resident in SA for normal tax purposes but is excluded from the definition of a resident for purposes of the corporate roll over rules Dividends declared are not subject to STC or the proposed dividend withholding tax Dividends received from a headquarter company do not enjoy the general local dividend exemption and are treated as foreign dividends, subject to the foreign dividend taxation rules The disposal of shares in the headquarter company by a shareholder could qualify for CGT exemption in SA in terms of the participation exemption rule No application of thin capitalisation rules for back to back cross-border loans to foreign companies that constitute qualifying investments Exemption from the pending withholding tax on interest in respect of back to back loans. A regional investment fund regime also applies from years of assessment commencing on or after 1 January Qualifying foreign investors will be regarded as passive investors with no exposure to South African tax because of the use of a South African portfolio manager. c. foreign tax relief Tax credits are granted in respect of foreign taxes paid on foreign sources income in accordance with unilateral provisions contained in the Income Tax Act and numerous Double Tax Agreements. Where income is sourced in SA, no foreign tax credit will be allowed but a deduction of the foreign taxes suffered is likely to be allowed. Special rules apply to foreign taxes suffered on income received or accrued from services rendered in SA. d. corporate Groups Group taxation is not applicable. However, corporate rules exist which provide relief in respect of transactions between group companies and between founding shareholders and their company. The relief provisions deal with the following transactions: asset-for-share transactions intra-group transactions unbundling transactions transactions relating to liquidation, winding-up or deregistration amalgamation transactions. Briefly, the corporate rules provide for the following tax relief in respect of the above mentioned transactions, provided certain requirements are met: CGT STC (until 31 March 2012) Securities transfer tax Stamp duty Income tax, specifically with respect to capital allowances claimed, recovery of capital allowances and the transfer of trading stock Transfer duty VAT. e. related party transactions The Commissioner for the South African Revenue Services is empowered to make adjustments to non-arm s length cross-border transactions and thin capitalisations between connected parties. There are also limitations on certain deductions and allowances on transactions between connected parties. 6

15 f. withholding taxes Royalty and similar income are subject to withholding taxes at source. A 10% withholding tax on dividends earned by non-residents will apply from 1 April 2012 and will replace the STC system. Dividends in kind will be subject to the 10% tax but the company declaring the dividends will be liable for the tax. A 10% withholding tax on interest accrued to non-residents is to be imposed from 1 January Notable exclusions will include so-called portfolio debt capital, i.e government bonds, listed securities, debts owing by local banks, domestic brokerage accounts, etc, international bank finance and interest paid by a headquarter company. G. exchange control Subject to certain limited exclusions, South African residents are subject to exchange controls. Non-residents are excluded from the ambit of exchange controls. H. personal tax As a result of the change from a source-based system of taxation to a resident-basis of taxation, SA resident individuals are, save for certain exclusions, subject to tax on their worldwide income irrespective of the source of the income. Non-resident individuals, subject to certain exclusions, are subject to tax on their SA sourced income only. A natural person will be regarded as a resident for tax purposes if he is ordinarily resident in SA or where the person is not ordinarily resident in South Africa but spends more than a certain number of days in SA (the physical presence test). The income tax rates applicable to natural persons for the tax year ending 28 February 2012 are: R0 R150,000 18% of each R1 R150,001 R235,000 R27, % of the amount over R150,000 R235,001 R325,000 R48, % of the amount over R235,000 R325,001 R455,000 R75, % of the amount over R325,000 R455,001 R580,000 R120, % of the amount over R455,000 R580,001 + R168, % of the amount over R580,000 In respect of the 2012 year of assessment, the first R22,800 for individuals younger than 65 years and the first R33,000 for individuals aged 65 years or older of local interest earned is exempt from tax. The first R3,700 of foreign interest earned is exempt from tax. Deductions available to salaried employees and directors are restricted to the following: Bad debt allowance Deductions in respect of contributions to a pension fund or retirement annuity fund Donations to certain Public Benefit Organisations Doubtful debts allowance Home office expenses, subject to requirements Legal expenses Medical expenses and medical aid contributions Premiums paid in terms of an certain allowable insurance policies Refunded awards for services rendered and refunded restraint of trade awards as from 1 March 2008 Wear and tear allowance. Medical expenses and retirement saving contribution deductions are subject to certain limitations. DEEMED EMPLOyEEs Labour brokers and personal service providers are regarded as employees. A labour broker is a natural person who, for reward, provides a client with other persons to render a service for the client or procures such other persons for the client and remunerates such person. 7

16 A personal service provider is a company or trust where any service rendered on behalf of the entity to its client is rendered personally by any person who is a connected person in relation to such entity and certain provisions are met. A labour broker not in possession of an exemption certificate will be subject to employees tax at the rate applicable to individual taxpayers. A personal service provider will be subject to employees tax at a rate of 33% in the case of a company and 40% in the case of a trust. Deductions available to deemed employees are limited to remuneration for services rendered, contributions to pension and provident funds, legal expenses, bad debts, rent, finance charges, insurance, repairs and maintenance and fuel, incurred wholly and exclusively for trade. i. treaty and non-treaty withholding tax rates Withholding tax rates for royalties, dividends (from 1 April 2012) and interest (from 1 January 2013) paid to non-residents from SA are as follows: Royalties (%) Dividends (%) Interest (%) Non-Treaty Countries: Treaty Countries: Algeria Australia 5 5/10 10 Austria 0 5/10 0 Belarus 5/10 5/10 5/10 Belgium 0 5/10 0/10 Brazil 10/ Botswana Bulgaria 5/10 5/10 5 Canada 6/10 5/10 10 China, People s Republic of 7/ Croatia 5 5/10 0 Cyprus Czech Republic 10 5/10 0 Denmark 0 5/10 0 Egypt Ethiopia Finland 0 5/10 0 France 12 5/10 0 Germany /10 10 Ghana 10 5/10 5/10 Greece 5/7 5/10 5/10 Hungary 0 5/10 0 India Indonesia Iran Ireland Israel Italy 6 5/10 10 Japan 10 5/10 10 Korea 10 5/

17 Royalties (%) Dividends (%) Interest (%) Kuwait Lesotho Luxembourg 0 5/10 0 Malawi Malaysia 5 5/10 10 Malta Mauritius 0 5/10 0 Mexico 10 5/10 0/10 Mozambique 5 8/10 0/8 Namibia 10 5/10 10 Netherlands 10 5/10 10 New Zealand 10 5/10 10 Nigeria / Norway 0 5/10 0 Oman Pakistan Poland 10 5/10 10 Portugal Romania Russian Federation Rwanda Saudi Arabia 10 5/10 10 Seychelles Singapore 5 5/10 0 Slovak Republic 10 5/10 0 Spain 5 5/10 5 Swaziland Sweden 0 0/7.5 0 Switzerland 0 5/10 5 Taiwan 10 5/10 10 Tanzania Thailand Tunisia /10 Turkey Uganda /10 Ukraine 10 5/10 10 United Kingdom United States 0 5/10 0 Zambia Zimbabwe Notes: 1. The above rates are provided as a guide only and reflect the potential withholding tax rates in SA. A number of Double Tax Agreements (DTAs) provide for alternative rates, including zero, to be applied in specific circumstances. To view the complete DTAs refer to 9

18 $