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Types of Taxes on Individuals in South Africa

Although this course focuses on personal income tax, there are various taxes that South Africans are liable to pay at some point in their lives, including:

  • Income Tax / Pay As You Earn
  • Value-Added Tax
  • Estate Duty
  • Donations Tax
  • Transfer Duty
  • Municipal Property Tax
  • Dividends Tax

Income Tax

As the name suggests, income tax is charged on your income. In this course we will focus on income tax for individuals.

Pay As You Earn (or PAYE) is a type of income tax that applies to employees. An employer is required to withhold PAYE from your wage or salary (which is why it is a withholding tax), so if you only earn income as an employee (and your employer is doing what is required of them) you do not have to pay income tax yourself.

Capital Gains Tax (or CGT) is a type of income tax that applies to profits made when selling a capital asset. We will have a look at what this means in the section on capital gains tax.

Value-added Tax

Value-added tax, or VAT for short, is the most widely paid tax in South Africa. VAT is levied on almost anything that is sold in South Africa, whether it is goods or services, although there are some exceptions. The seller is required to pay over the VAT to SARS. As a business, and if you are registered for VAT, when you sell something that you have paid VAT on, you are generally allowed to claim back the VAT you have previously paid.

Estate Duty

Estate Duty is a tax on the value of your assets when you die. If your estate (assets minus liabilities) is worth less than R3,5m no estate duty is payable. On the value above R3,5 million you pay estate duty at a rate of 20% (and 25% if you’re very well off and your estate is worth more than R30 million).

Donations Tax

Donations tax is payable on 20% of the value of donations by South Africans. Every year you have an exemption of R100 000 that may be donated tax free.

Transfer Duty

Transfer duty is payable by someone you buys an immovable property (i.e. land and buildings attached to land). Transfer duty rates vary depending on the value of the property, and the rates can be accessed here.

Municipal Property Taxes

Municipal property taxes must be paid by owners of immovable property to their local municipalities. The tax rates vary (as they are set by municipalities) and are based on the value of the property.

Dividends Tax

Dividends are declared by companies which declare profits to their shareholders. Dividends tax is payable at a rate of 20% by shareholders on dividends earned. This is another example of a withholding tax because a company is required to automatically deduct 20% of dividends declared and pay it to SARS.