Change, the new certainty Tax Facts February 2018/2019 Income Tax Residence basis of taxation South Africa has a residence basis of taxation. Residents are taxable on worldwide income and capital gains, subject to certain exclusions. Non-residents are taxable on South African source income and capital gains only. Individuals and special trusts Rate of tax Taxable income Rate of tax - years of assessment ending 28 Feb 2019 R0 195 850 18% of taxable income R195 851 R305 850 R35 253 + 26% of taxable income above R195 850 R305 851 R423 300 R63 853 + 31% of taxable income above R305 850 R423 301 R555 600 R100 263 + 36% of taxable income above R423 300 R555 601 R708 310 R147 891 + 39% of taxable income above R555 600 R708 311 R1 500 000 R207 448 + 41% of taxable income above R708 310 R1 500 001 and above R532 041 + 45% of taxable income above R1 500 000 Taxable income Rate of tax - years of assessment ending 28 Feb 2018 R0 R189 880 18% of taxable income R189 881 R296 540 R34 178 + 26% of taxable income above R189 880 R296 541 R410 460 R61 910 + 31% of taxable income above R296 540 R410 461 R555 600 R97 225 + 36% of taxable income above R410 460 R555 601 R708 310 R149 475 + 39% of taxable income above R555 600 R708 311 R1 500 000 R209 032 + 41% of taxable income above R708 310 R 1 500 001 and above R533 625 + 45% of taxable income above R1 500 000
Tax rebates Rebates 2017/2018 2018/2019 Primary - All persons R13 635 R14 067 Secondary - Additional for persons of 65 and older R7 479 R7 713 Tertiary - Additional for persons of 75 and older R2 493 R2 574 Tax thresholds below which no tax is payable Tax thresholds 2017/2018 2018/2019 Below age 65 R75 750 R78 150 Age 65 and below 75 R117 300 R121 000 Age 75 and over R131 150 R135 300 Foreign dividends Most dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%. No deductions are allowed for expenditure to produce foreign dividends. Interest exemptions Interest exemption 2017/2018 2018/2019 Individuals below age 65 - total R23 800 R23 800 Individuals above age 65 - total R34 500 R34 500 An additional tax benefit for contributions to tax-free savings accounts of up to R33,000 per individual per annum. Maximum of R500,000 over the life of the individual.
Companies and Trusts Rate of tax Years of assessment ending between 1 Apr 2017 and 31 Mar 2018 Years of assessment ending between 1 Apr 2018 and 31 Mar 2019 Income tax Company (resident and nonresident and personal service provider) 28% of taxable income 28% of taxable income Gold mining, oil and gas, and long-term insurance companies are subject to special rules Small business corporation (individual shareholders; gross income may not exceed R20m; investment income limited to 20% of gross income) Micro business (may elect to be taxed on gross turnover on cash receipts only, limited record-keeping and submissions to SARS are required) Trusts (excluding special trusts including personal service provider) Sliding scale reaching 28% above taxable income of R550,000 Turnover may not exceed R1m p.a. Sliding scale reaching 3% above turnover of R750,000 Sliding scale reaching 28% above taxable income of R550,000 Turnover may not exceed R1m p.a. Sliding scale reaching 3% above turnover of R750,000 45% 45% Withholding tax (subject to double taxation agreement) Dividends tax 20% 20% Interest paid to a non-resident 15% 15% Royalties paid to a non-resident 15% 15% Services fees to non-resident sports persons & entertainers 15% 15%
Tax allowances Manufacturing plant & machinery (section 12C) Renewable energy assets (section 12B) Commercial buildings (section 13quin) 40%: 20%: 20%: 20% 40%:20%:20%:20% 50%: 30%: 20% 50%:30%:20% 5% 5% Special tax allowance provisions apply to capital expenditure of specific industries, e.g. mining, oil and gas extraction, farming, hoteliers, ship owners and toll road operators. Moveable assets which do not fall within the above categories qualify for varying rates set out in Interpretation Note 47 [section 11(e)]. Capital gains tax (CGT) A portion of the net capital gain on the disposal of an asset is included in taxable income, according to a specific inclusion rate: Taxpayer Inclusion rate Effective CGT rate Individuals and special trusts 40% 40% Company (including non-resident company) 80% 80% Trusts 80% 80% Events that trigger a disposal include a sale, donation, exchange, loss, death and emigration. Exclusions Annual reduction of R40,000 for individuals and special trusts. Exclusion of R300,000 for the year of death. R2 million exemption on capital gain or capital loss on disposal of primary residence. Most personal (private, non-business) use assets and retirement benefits. Payments to original holders of long-term insurance policies. Small business exclusion (where a person is over 55 years old) of R1,8 million when a small business with a market value not exceeding R10 million is disposed of.
Disposal of immovable property by a non-resident A purchaser must withhold tax from the consideration payable to a non-resident seller of immovable property situated in South Africa, as an advance in respect of that seller s liability for tax in South Africa. The amount to be withheld is 7.5% of the consideration for a natural person, 10% of the consideration for a company and 15% of the consideration for a trust. Provisional tax A provisional taxpayer is any company and any person who derives any amount which does not constitute remuneration unless the person is an individual who does not derive any income from the carrying on of any business and the individual s taxable income: Does not exceed the tax threshold; or Is derived from interest, foreign dividends and rental from the letting of fixed property will not exceed R30,000. Allowances and fringe benefits Travel allowance Value of the vehicle Fixed cost Fuel cost Maintenance (including VAT) R R/annum c/km cost c/km R0 - R85 000 28 352 95.7 34.4 R85 001 - R170 000 50 631 106.8 43.1 R170 001 - R255 000 72 983 116.0 47.5 R255 001 - R340 000 92 683 124.8 51.9 R340 001 - R425 000 112 443 133.5 60.9 R425 001 - R510 000 133 147 153.2 71.6 R510 001 - R595 000 153 850 158.4 88.9 Exceeding R595 000 153 850 158.4 88.9
The above table sets out the rates per kilometre used in determining the allowable deduction for business travel against an allowance where no records of actual costs are kept. A logbook must be kept of the business travel incurred. PAYE is withheld from 80% of the travel allowance granted (reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle is for business purposes). The reimbursive rate per kilometre for business travel has increased from R3.55 to R3.61. Refer to the SARS website www.sars.gov.za for more information. Employer-owned vehicles The taxable value of the private use of the company vehicle is based on 3,5% of the determined value of the vehicle (reduced from 3,25% where the vehicle is subject to a maintenance plan). PAYE is withheld from 80% of the taxable value (reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle is for business purposes). The determined value of the vehicle is the retail market value as determined by the Minister by regulation when the employer first obtained the vehicle or manufactured the vehicle. Where the vehicle is acquired by the employer under an operating lease, the taxable value of the taxable benefit is the actual cost to the employer of the operating lease plus the cost of fuel. Local travel An allowance may be provided to an employee who is obliged to spend at least one night away from the usual place of residence on business and the accommodation is in the Republic. The amounts deemed to be expended are set out below: 2017/2018 2018/2019 Meals and incidental costs R397 per day R416 per day Incidental costs only R122 per day R128 per day
Overseas travel Where the accommodation is outside the Republic, a specific amount per country is deemed to have been expended. Details of these amounts are published on the SARS website. Medical scheme fees tax credit A tax rebate is allowed to a person in respect of employee and employer contributions to medical aid schemes: Under the age of 65, with effect from the 2013 tax year. 65 years of age and over, with effect from the 2015 tax year. Basic tax credit Taxpayers who belong to a medical scheme qualify for a monthly tax rebate, as follows: Description 2017/2018 2018/2019 In respect of the taxpayer R303 R310 In respect of the taxpayer and one dependant R606 R620 In respect of each additional dependant R204 R209 Additional medical tax credit from 2015 Persons under 65: 25% of the amount by which the sum of: The taxpayer s medical scheme contributions for the year, in excess of four times the basic medical tax credits; plus Unrecoverable medical expenses paid, Exceeds 7.5% of the taxpayer s taxable income (excluding retirement fund lump sums and severance benefits). Persons aged 65 and/or a person who is subject to a disability: 33.3% of the difference between the taxpayer s medical scheme contributions for the year as exceeds three times the basic medical tax credit; plus 33.3% of unrecoverable medical expenses paid.
Retirement funds Taxable benefit in respect of employer contributions Effective 1 March 2016, employer contributions to pension, provident and retirement annuity funds are included in the individual s taxable income as a taxable fringe benefit and deemed to be a contribution made by the individual. The value of the fringe benefit in the case of: Defined contribution funds, is equal to the actual employer contribution. Funds other than defined contribution funds, is calculated in accordance with a formula. Deduction in respect of contributions Individuals are allowed to claim a deduction for contributions to a pension, provident and retirement annuity fund. The deduction is limited to the lesser of: R350,000; or 27,5% of the higher of remuneration or taxable income. Retirement fund lump sum withdrawal benefits Taxable income R0 R25,000 Rate of tax 0% of taxable income R25,001 R660,000 18% of taxable income above R25,000 R660,001 R990,000 R114,300 + 27% of taxable income above R660,000 R990,001 and above R203,400 + 36% of taxable income above R990,000 Retirement fund lump sum withdrawal benefits consist of lump sums from a pension, pension preservation, provident, provident preservation or retirement annuity fund on withdrawal (including assignment in terms of a divorce order).
Retirement fund lump sum benefits or severance benefits Taxable income R0 - R500,000 Rate of tax 0% of taxable income R500,001 - R700,000 18% of taxable income above R500,000 R700,001 - R1,050,000 R36,000 + 27% of taxable income above R700,000 R1,050,001 and above R130,500+ 36% of taxable income above R1,050,000 Retirement fund lump sum benefits consist of lump sums from a pension, pension preservation, provident, provident preservation or retirement annuity fund on death, retirement or termination of employment due to redundancy or termination of the employer s trade. Severance benefits consist of lump sums from or by arrangement with an employer due to relinquishment, termination, loss, repudiation, cancellation, or variation of a person s office or employment, provided the person has attained the age of 55, or the termination is due to permanent incapacity of mind or body, or employer ceasing to carry on a business. Other deductions Donations to approved public benefit organisations Deduction of donations is limited to 10% of taxable income before deducting medical expenses. Any excess may be carried forward. Other taxes Value-added tax (VAT) VAT is levied on the supply of goods and services by registered vendors, as follows: Supplies Rate 2017/2018 2018/2019 Standard rate 14% 15% Zero rate 0% 0%
Transfer duty Transfer duty is payable on the value of immovable property acquired and not subject to VAT, as follows: Value of property Rate R0 R900 000 0% R900 001 R1 250 000 3% of the value above R900 000 R1 250 001 R1 750 000 R10 500 + 6% of the value above R 1 250 000 R1 750 001 R2 250 000 R40 500 + 8% of the value above R 1 750 000 R2 250 001 R10 000 000 R80 500 +11% of the value above R2 250 000 R10 000 001 and above R933 000 + 13% of the value above R10 000 000 Estate duty Estate Duty is levied on property of residents and South African property of nonresidents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million and bequests to a surviving spouse are allowed in the determination of dutiable net assets. Donations tax Levied at a flat rate of 20% on the value of property donated by a resident and 25% on the value of property exceeding R30 million. Exemptions include: First R100,000 of property donated by a natural person. Donations between spouses. Donations by public companies. Casual gifts by private companies up to R10,000 p.a. Donations to approved public benefit organisations. Donations between resident group companies.
Skills Development Levy (SDL) SDL is payable by employers to SARS at a rate of 1% of employees total remuneration. Employers paying annual remuneration of less than R500,000 are exempt from SDL. Unemployment Insurance Fund (UIF) UIF is payable to SARS by employers and employees at a rate of 1% of the employees remuneration up to a threshold of R14 872. The maximum contribution for employees who earn more than R14 872 is R148.72 per month. Employers not registered for PAYE or SDL purposes must pay the UIF contributions to the Unemployment Insurance Commissioner. Securities Transfer Tax (STT) STT is imposed at a rate of 0,25% on every transfer (including cancellation) of a security. Green taxes Carbon tax Not yet in force. Proposed tax is R120 per ton CO2, increasing by 10% p.a. Proposed implementation date: 1 January 2019. Section 12K Exemption for any amount received in the furtherance of qualifying Clean Development Mechanism project. Section 12L Deduction calculated at 95 cents per kilowatt hour of energy efficiency savings, provided a certificate is obtained.
SARS interest rates Rate of interest (effective 1 Mar 2018) Rate Outstanding taxes, duties and levies and those payable in respect of refunds of tax on successful appeals and certain delayed refunds Payable on credit amounts (overpayment of provisional tax) in terms of section 89quat(4) of the Income Tax Act, 1962 Rates at which interest-free or low interest loans are subject to income tax 10.25% (as from 1 November 2017) 6.25% (as from 1 November 2017) 7.75% (as from 1 August 2018) EY Assurance Tax Transactions Advisory @EY_Africa 2018 EYGM Limited. All Rights Reserved Creative Services ref. 2439. Artwork by xxxx. ey.com/za Disclaimer This tax facts card is based on the budget proposals tabled in Parliament by the Minister of Finance on 21 February 2018 which are subject to approval by Parliament. The tax facts card is for general guidance only. Specific tax advice must be obtained when considering the tax effects of particular transactions. No liability is accepted for the consequence of any inaccuracies contained in this tax facts card.