South Africa: Domestic Corporate Taxes

On this Page:

- SOUTH AFRICA SCOPE OF INCOME TAX
- SOUTH AFRICA INCOME TAX RATES
- SOUTH AFRICA CALCULATION OF TAXABLE BASE
- SOUTH AFRICA FILING REQUIREMENTS, PAYMENT OF TAX
- SOUTH AFRICA WITHHOLDING TAXES
- SOUTH AFRICA SALES TAXES AND VAT

South Africa Scope of Income Tax

Resident companies (i.e. those incorporated or effectively managed in South Africa) are taxed on their worldwide income. Non-resident companies are taxed on their South African-sourced income.

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South Africa Income Tax Rates

The corporate income tax rate is generally 28%; there is also a secondary tax on companies (STC) of 10% on net dividends declared by the company.

Separate corporate tax rates are charged on mining companies (ranging from 28% to 50%, depending on the material being mined); long-term insurance companies (28% or 30%, depending on the type of fund); small business corporations (between 0% and 28%, depending on taxable income); employment companies and companies that are non-resident (33%); and public benefit organisations/recreational clubs (28% or 29%).

Retirement funds are exempt from income tax with effect from March 1, 2007.

For small businesses (i.e. with annual turnover of up to ZAR1m), a simplified Turnover Tax method is available, which replaces value added tax, income tax, provisional tax, capital gains tax and STC. The marginal rates of Turnover Tax for the 2009/10 year of assessment are as follows:

Turnover	Marginal rate
ZAR0–ZAR100,000	0%
ZAR100,001–ZAR300,000	1% for each ZAR1 above ZAR100,000
ZAR300,001–ZAR500,000	ZAR2,000 + 3% of the amount above ZAR300,000
ZAR500,001–ZAR750,000	ZAR8,000 + 5% of the amount above ZAR500,000
ZAR750,001 and above	ZAR20,500 + 7% of the amount above ZAR750,000

The Turnover Tax method can prove useful where record-keeping is too burdensome or expensive; or meeting the requirements of the current tax system is too difficult or expensive. Note that it is not possible to register for both Turnover Tax and VAT – small businesses that are currently VAT-registered must deregister before signing up for Turnover Tax. The business must register for Turnover Tax by end February to be able to benefit from this method for the following year of assessment. Certain limitations apply; for example, businesses that provide a professional service, or are public benefit organisations or recreational clubs, do not qualify for Turnover Tax.

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South Africa Calculation of Taxable Base

Tax is calculated on gross income, excluding income of a capital nature and, in the case of non-resident taxpayers, income from a source outside South Africa, and less allowable expenses and deductions.

Trading losses can be carried forward indefinitely. Losses cannot be carried back. Assessed losses can be offset against a taxable capital gain.

South Africa Filing Requirements and Payment of Tax

The date by which tax returns must be submitted is set each year by the tax commissioner. The tax year runs from March 1 to end February, although the taxpayer may choose an alternative tax year. Tax returns can be submitted online.

Companies must make two provisional tax payments during the course of the tax year, and may opt to make a third “topping-up” payment six months after the end of the tax year.

Late payment of tax is subject to interest of 11%.

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South Africa Withholding Taxes

Interest and dividends are not subject to withholding tax. However, STC of 10% is payable on the net amount of dividends, although it looks likely that this will be replaced with a 10% withholding tax towards the end of 2010.

Royalties paid to non-residents are subject to withholding tax of 12%, unless a double tax treaty applies. Gross payments for income earned in South Africa by non-resident sportsmen and entertainers are subject to 15% withholding tax.

From March 1, 2010, mining companies are subject to a new royalty payment of between 0.5% and 7% on gross sales of minerals mined, less allowable deductions.

South Africa Sales Taxes and VAT

The standard rate of VAT is 14%, and applies to most supplies of goods and services and imports; some goods and services are exempt (e.g. financial services, residential accommodation in a dwelling, public passenger transport, educational services and childcare services) or are subject to zero rate VAT, such as exports. The registration threshold is ZAR1m in any 12-month period, although there is a voluntary registration threshold of ZAR20,000.

Small businesses who choose to pay tax through the Turnover Tax method (see above) cannot register for VAT.

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