The most commonly levied forms of tax in South Africa are listed below. For a complete run down of all South African taxes, visit http://www.sars.gov.za/home.asp?pid=161.
Capital Gains Tax (CGT)
CGT is considered an integral part of the income tax system – it’s a tax on capital gain, which residents have to pay upon the disposal of any assets, immovable or fixed, in South Africa or outside its borders. Non-residents also have to pay CGT on taxable gains received from the disposal of any of the following assets:
- Land, buildings and other immovable property in South Africa.
- Any long-term lease or other right or interest in immovable property in the country.
- Shares in any company in which the non-resident holds 20% or more of the shares, and 80% or more of the value of the company’s net assets is made up by immovable property in South Africa.
- Assets of any permanent establishment owned by the non-resident in South Africa.
If you’re registered for income tax, you don’t need to register separately for CGT. If you aren’t, however, and you dispose of an asset in South Africa in such a way that this results in capital gain or loss, you’ll need to submit an income tax return.
The inclusion rate of CGT for taxable income is 25% for individuals and 50% for trusts, businesses, close corporations and so forth. It’s acceptable to deduct your capital losses from your capital gains and carry the difference over to future tax years.
In the case of owner-occupied residences, the first R1 million is exempt from CGT. So, too, are transfers between spouses, transfers of private motor vehicles, and the disposal of personal effects, small business assets and gambling proceeds. You cannot be billed for CGT on any transaction already subject to income tax.
Transfer Duties/ Transfer Fees
Transfer duty is a government tax that tends to constitute the majority of the secondary costs when purchasing a home. If the seller is VAT registered, then no transfer duty will be payable, as the seller is supposed to include VAT in the proposed purchase price of the property.
There is no transfer duty levied on individuals for property with a purchase price of R500 thousand or less. Between R500 thousand and R1 million, a duty of 5% of the value over R500 thousand is levied. Between R1 million and R2 million, a duty of 8% added to a flat rate of R25 thousand is charged, and so forth.
For trusts, companies and closed corporations, an amount equal to 8% of the purchase price is required. Registered VAT vendors can claim this sum back at the end of the year from SARS (the South African Revenue Service).
Value Added Tax (VAT)
The government requires most traders and vendors to register for VAT and charge their customers and vendors for the consumption of their various goods and services. The tax is proportional to the priced charged for goods, and is only charged on goods made or purchased with taxable supplies. This doesn’t include salaries, wages, or the occasional sale of personal or domestic items.
VAT is a destination-based tax. Thus it’s charged on goods or services sold in South Africa, whether they’re produced here or imported. It’s currently levied at a standard rate of 14%.
Anyone who sells taxable supplies to a value exceeding R1 million in any 12 month period is required to register for VAT. Anyone who sells in excess of R20 000 is entitled but not required to register.
Individuals and companies that register for VAT are referred to as vendors. Vendors have certain legal obligations, including the collection of VAT on all taxable transactions, the timely submission of all returns and payments, and the inclusion of VAT in any prices they quote or advertise.
To apply for VAT, you’ll need to fill out the VAT101 form. For assistance in completing this form, it would also be a good idea to take a look at the VAT application form guide for prospective vendors. Both are available at http://bit.ly/tGHuG. If you need to de-register from VAT, you’ll need to complete the VAT123 form. It’s available at http://bit.ly/13FPiM.
These include municipal rates, along with fees for refuse and sewerage disposal.
All property owners (aside from those in unserviced rural areas) are required to pay these rates, which are intended to amount to about 1 per cent of the value of their property. In the special case of sectional title schemes, rates are levied according to the value of the scheme as a whole, and then paid by owners according to their participation quotas. In some industrial areas, these rates may be higher or lower, depending on government edict.
You’ll know you need to pay this tax when you receive a mailed valuation notice from the city. The notice will include the governmental estimate of your property’s value, along with your ‘rate free’ amount – normally around R50 000.
To arrive at your required monthly payment, subtract the ‘rate free’ amount from the value of your property, and multiply the resultant number by 0.98 (the current municipal rates percentage in Cape Town). Divide that number by 12 to determine your required monthly payment.
In Cape Town, the refuse charge is composed of a fixed rate and a valuation-based rate. The first is a per month charge for your street-side wheelie-bin (currently set at R38.60), which is reduced by R5.00 if you don’t need one. You can calculate the second part by subtracting your ‘rate free’ amount from the estimated value of your property and multiplying the result by 0.038 per cent.
These are calculated in a similar manner to refuse rates. You’ll be charge a fixed, maximum fee of R38 (depending on the value of your property), along with a fee determined by your annual consumption of water by liters. If you consume between 4201 and 14 000 liters, you’ll pay R2.04, if you consume between 14001 and 35 000 liters you’ll pay R3.25 and so forth.
TV License Rates
This tax is used to fund public broadcasting, and allows the various channels to broadcast their programming without the assistance of an income from radio or TV advertising (though, of course, none of them really do).
The current annual license fee is R250 for each TV in a given household. You can also pay the fee monthly, though that will result in it being raised to R312 for the convenience. You can visit http://www.tvlic.co.za to register and pay yours online. Be aware, though, that punishment for noncompliance is very poorly enforced by the government, and that it’s quite unlikely that you’ll ever be asked to produce your TV license.