Tax system in South Africa

Expats living in South Africa can expect to pay tax to their adopted country, and have to adapt themselves to South Africa's taxation system. There are several ways in which long-term visitors and expats can be taxed in South Africa. In essence, taxation in South Africa is controlled by regulations including the Income Tax Act (1962), VAT Act (1991) and a Customs Act (1964). More recently, the Tax Administration Act has been passed, and this outlines the way that the South African Tax Office can take money from workers and residents of the country who are expats. Being able to negotiate around the different layers of taxation is vital for any foreign national living in the country, but particularly for those travelling on business and working visas, or staying long-term in South Africa.

Income tax

The South African Tax system is run according to a residence-based classification, which means that money has to be paid by residents no matter where the income is earned. Expats are regarded as temporary residents of the country once they have lived there continually for 184 days of a complete tax year, and must pay tax on any earnings from work in South Africa. Expats become full residents after they have been on the country for 5 years, and will then have to pay tax on their total income, regardless of where it is earned. All residents must have registered as provisional taxpayers to the Revenue Service if they earn more than R10,000, and as full tax payers if they earn more than R60,000. This is not automatic, but must be done. Provisional taxpayers may also be expected to submit more than one tax return, often in August and February, with a third in September. Employee tax is often taken from wages in the form of PAYE (Pay As You Earn).

Those working in South Africa can expect to have to pay taxation on their wages through PAYE systems, which are extracted as the visitor earns wages. There may be extra tax payments to make at the beginning of the first year of work in South Africa. Those who are not paid wages, but get sources through trade, or through commissions, will often have to make provisional payments during the tax year, and they may also pay an additional third payment at the end of the tax year, helping to reduce next year's costs. There may be many additional payments which will be charged, so visitors need to bear this in mind too.

Corporate tax

Business visitors to the country can expect to be taxed on their company earnings if they run a small business, or if they are earning money from consultancy or freelance work in addition to their waged work. They can expect to pay more for this kind of earnings, an average about 28% of the taxable income. In addition, if the individual has any shares in the business, or receives dividends, then they can also expect to have to pay for this, too. All of this means that business visitors need to be prepared to pay a higher rate of taxation in South Africa than they would at home.

Others

There are also other methods of being taxed which will affect anyone who enters South Africa, including taxes on VAT, which will be charged on non-essential items. Paying for many things in South Africa will cost the visitor, as almost one third of the total tax revenue for the country comes from VAT and other indirect taxes, a considerable amount.

Useful links:

South African Revenue Service (SARS) www.sars.gov.za
Tax and Immigration ' SARS www.sars.gov.za/ClientSegments/Individuals
Taxation guide for Foreign workers www.sars.gov.za/AllDocs/OpsDocs/Guides
Registering for Tax ' IT 77 Form www.sars.gov.za/AllDocs/OpsDocs/SARSForms