Taxation in South Africa is a well-established and robust system, and generally involves payments to a minimum of two different levels of government; the national government through the South African Revenue Service (SARS), and local government by means of measures such as rates.

Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.

Central government revenues come primarily from income tax, value added tax (VAT) and corporation tax. Local government revenues come primarily from grants from central government funds and municipal rates. In the 2018/19 fiscal year SARS collected R 1 287.7 billion (equivalent to US$ 86.4 billion) in tax revenue, a figure R71.2 billion (or 5.8%) more than that from the previous fiscal year.

In 2018/19 financial year, South Africa had a tax-to-GDP ratio of 26.2% that was only slightly more than the 25.9% in 2017/18. The cost of collecting tax revenue has remained somewhat constant; decreasing slightly from 0.93% of total revenue in 2016/17 to 0.89% in 2017/18, while the 2018/19 financial year showed a further improvement in the cost of revenue collection, which dropped to 0.84%.

Three of the provinces of South Africa contributed 77.8% of the total tax revenue: Gauteng (49.0%), Western Cape (15.5%), and KwaZulu-Natal (13.3%). The provinces with the smallest contributions were the Northern Cape (1.3%), followed by Free State (3.2%) and North West (3.3%)

Overview

The South African Revenue Service (SARS) is responsible for the collection of taxes within the Republic of South Africa. The mandate and vision of the South African Revenue Service, quoted from their website, is to: Collect all revenues due. Ensure optimal compliance with Tax, Customs and Excise legislation. Provide a customs and excise service that will facilitate legitimate trade as well as protect our economy and society. SARS is driven by the aspiration to contribute directly to the economic and social development of the country by collecting the revenue due to enable government to deliver on its constitutional obligations, policy and delivery priorities in pursuance of better life for all in South Africa. By encouraging tax and customs compliance, we also aspire to contribute to the building of fiscal citizenship reflected by a law abiding society. The anchor for SARS to deliver on this mandate is the higher purpose and values which drives and informs all SARS employees' behaviour."

Number of taxpayers On 31 March 2019, the tax register of SARS had in excess of 26 million entries, excluding the following: 1) those cases where the persons or entities were suspended; 2) estates; and 3) entities with unknown addresses. Individuals made up 79% of the entries with an aggregate income of R1.7 trillion. The tax register increased to more than 27 million entries for 2020.

In 2019, of the 22.1 million individual taxpayers only 6.6 million (31%) were expected to submit tax returns, while in 2020 the number of individual tax payers increased to 22.9 million but the number expected to submit tax returns fell to 6.3 million (27.5%).

Furthermore, in 2019 only 4.9 million taxpayers (23%) submitted returns and were assessed. Of the assessed taxpayers only 882 000 (18%) owed SARS some tax, 11.3% had a zero assessment and 70.7% received refunds. Furthermore, of the 4.9 million assessed tax payers 1.9 million (40.2%) were from the Gauteng province and 1.3 million (27.3%) were in the 35 – 44 age bracket.

+ Tax Register & Quick comparison of statistic for 2019 and 2020Category Tax register Expected to Submit Collection 2019 2020 2019 2020 2019 2020 Individuals 22 170 513 22 919 701 6 562 568 6 308 515 R493.8bn1 R529.2bn1 Companies 2 020 759 2 548 975 991 207 939 781 R214.4bn R215.0bn2 Trusts 357 859 363 860 Employers (PAYE) 552 611 582 289 VAT vendors 802 957 831 821 448 710 449 597 R324.8bn3 R346.8bn3 Importers 319 949 329 820 R55.0bn4 R55.4bn4 Exporters 288 604 297 448 Notes: Includes PAYE Includes interest on overdue income tax Nett VAT (incl. payments, refunds, etc.) Customs Duties

Categories of Tax Direct taxes are taxes which are imposed on individuals, trusts, deceased estates, companies and close corporations; all of whom are otherwise known as persons. Indirect taxes are collected by an intermediary from the person who bears the ultimate economic burden of the tax. The intermediary later files a tax return and forwards the tax proceeds to government with the return. Of the R1 216 billion collected by SARS in 2017/2018, 93% (or R1 133 billion) came from taxes on both Personal and Company Income and Profits, and taxes on Domestic Goods and Services, a combination of both direct and indirect taxes.

+ Categories of Tax within South Africa Type of tax Revenue in Rands 2017/18 Percentage of Total RevenueIncome and Profits R 711.7 bn 58.5%Payroll and workforce R 16.0 bn 1.3%Property R 16.5 bn 1.4%Domestic goods and services R 422.2 bn 34.7%International trade and transactions R 49.9 bn 4.1%Miscellaneous State Revenue (R 0.0024 bn) -0.0% Total R 1 216 bn 100%

The revenue obtained by SARS in the 2017/18 financial year for each of the above categories is further explained below.

Offences under the tax act The Tax Administration act, 2011 deals with offences regarding tax. A person commits an offence if they fail to: submit a tax return or document to SARS; or fail to issue a document to a person as needed; or fail to register or amend a registration in the instance where registered details have changed; or keep records as needed by SARS; or knowingly submit a false tax certificate or statement; or refuse or neglect to take an oath or make a solemn declaration.

A person convicted of these offences may be liable to a fine or imprisonment not exceeding two years.

Tax loopholes Various tax loopholes have been identified by SARS over the years and have been successfully closed. These include: cross-border mismatches, insurance payments and interest exemptions; interest cost allocation for finance operations; transfer pricing; and certain classes of preference and guaranteed shares.

Direct Taxes on Income and Profit In the 2018/19 financial year, SARS collected R758.8 bn from taxes on Income and Profits. The table below gives a breakdown of this revenue.

+ Breakdown of tax revenues from Income and Profits 2018/19 Type of tax Amounts in Rands Percentage of total Persons and Individuals R493.8 bn 65.1% Companies R214.4 bn 28.3% Dividends Tax1 R 29.9 bn 3.9% Other2 R20.7 bn 2.7% Total R758.8 bn 100% Notes: Dividends Tax & Secondary Tax on Companies combined for 2018/19 tax year Includes tax on retirement funds, small business tax amnesty proceeds and withholding tax on interest

Taxes on Persons and Individuals Any person who receives an income within South Africa has to be registered for tax purposes and if any employees of a company doing business within South Africa are registered for tax purposes with SARS, the company must register as an employer with SARS. Furthermore, any Tax-registered company has to register its employees with SARS, irrespective of their tax status.

Personal income tax is South Africa's largest source of revenue. In 2017/18 it contributed 38.1% of the total tax revenue.

+ Breakdown of tax revenues from Persons and Individuals 2017/18 Type of tax Amounts in Rands Percentage of total Pay-as-you-earn R 446 bn 96.4% Provisional tax R 29 bn 6.4% Assessment payments R 16 bn 3.5% Employment Tax incentives (R 4.3 bn) -0.9% Refunds (R 26.8 bn) -5.8% Interest on overdue tax R 1.95 bn 0.4% Total R 463 bn 100%

Personal income tax brackets There was no change in the personal income tax table for the period 1 March 2024 to 28 February 2025. Budget 2025 SARS Individual Tax Rates 2025

+Income Tax: Individuals and Trusts (2024/25)Taxable Income Rate of Tax 0 – R237 100 18% of taxable income R237 101 – R370 500 R42 678 + 26% of taxable income above R237 100 R370 501 – R512 800 R77 362 + 31% of taxable income above R370 500 R512 801 – R673 000 R121 475 + 36% of taxable income above R512 800 R673 001 – R857 900 R179 174 + 39% of taxable income above R673 000 R857 901 – R1 817 000 R251 258 + 41% of taxable income above R857 900 R1 817 001 and above R644 489 + 45% of taxable income above R1 817 000

Taxes on Companies

The Income Tax Act, No 58 of 1962 defines a company under South African law. Nearly 3.7 million companies were on the tax register in March 2017 but only 3.1 million in March 2018. Of these only 24.2% reported positive taxable income, while 48.3% reported zero taxable income and 27.4% reported negative taxable income.

SARS collected R220.2 bn from companies in the 2017/18 financial year as per the table below. + Breakdown of tax revenues from Companies 2017/18 Type of tax Amounts in Rands Percentage of total Provisional Tax R 218.6 bn 99.3% Assessment payments R 11.8 bn 5.4% Royalties R 0.6 bn 0.3% Refunds (R 13.6 bn) -6.2% Interest on overdue tax R 2.8 bn 1.3% Total R 220.2 bn 100%

Taxes on Property

In the 2017/18 financial year SARS collected R16.5 bn in taxes on property. + Breakdown of tax revenues from Property 2017/18 Type of tax Amounts in Rands Percentage of total Donations tax R 0.7 bn 4.4% Estate Duty R 12.2 bn 13.8% Securities Transfer Tax R 5.8 bn 35.2% Transfer Duties R 7.7 bn 46.6% Total R 16.5 bn 100%

Taxes on Goods and Services

In the 2017/18 financial year SARS collected R422.2 bn in domestic taxes on goods and services. + Breakdown of Domestic tax revenues on Goods and Services 2017/18 Type of tax Amounts in Rands Percentage of total Value-Added Tax (VAT) R 298.0 bn 70.58% Specific excise duties R 37.4 bn 8.86% Ad Valorem excise duties R 3.8 bn 0.9% Fuel Levy R 70.9 bn 16.79% Environmental taxes R 11.2 bn 2.65% Other* R 0.9 bn 0.21% Total R 422.2 bn 100% *Includes Universal Service Fund, Turnover Tax for Micro Businesses, Tyre Levy and International Oil Pollution Compensation Fund

Value-Added Tax (VAT)

The VAT component of the tax revenue SARS collected in 2017/18 can be further broken down into Domestic VAT and Imported VAT, as per the table below: + Breakdown of tax revenues on VAT 2017/18 Type of tax Amounts in Rands Percentage of total Domestic VAT R 336.2 bn 68.8% Import VAT R 152.8 bn 31.2% VAT Refunds (R 191.0 bn) -39.1% Total R 298 bn 100%

Fuel Levy The Fuel Levy component (R70.9 bn in 2017/18) of the Domestic tax revenue on Goods and Services can be further broken down as per the table below. + Breakdown of the Fuel Levy 2017/18 Type of tax Amounts in Rands Percentage of total Fuel Levy R 72.1 bn 101.7% Road Accident Fund (RAF) R 1.8 bn 2.6% Diesel Refunds (R 3.0 bn) -4.3% Total R 70.9 bn 100%

Taxes on International Trade and Transactions

In the 2017/18 financial year SARS collected R49.9 bn in taxes on International trade and transactions. + Breakdown of Domestic tax revenues on International Trade and Transactions 2017/18 Type of tax Amounts in Rands Percentage of total Customs Duties R 49.1 bn 98.4% Miscellaneous customs and excise receipts R 0.7 bn 1.4% Diamond export levy R 0.09 bn 0.2% Total R 49.9 bn 100%

Explanation of tax types within South Africa Income tax in South Africa was first introduced in 1914 with the introduction of the Income Tax Act No 28, an act that had its origins in the New South Wales Act of 1895. The act has gone through numerous amendments with the act presently in force is the Income Tax Act No 58 of 1962 which contains provisions for four different types of income tax. These four types of tax are: normal tax donations tax secondary tax on companies withholding tax

Capital gains tax