The South African tax regime is set by National Treasury but managed by the South African Revenue Service (SARS). The country’s tax system is one of the most well-developed and regulated systems in the world. Free State province, just like all the other eight provinces in the country, follows the same tax regime set by National Treasury. There are however SARS branches throughout the country and a provincial treasury in each of the nine provinces. The South African tax year runs from 1 March to the end of the February of the following year.
The following are types of taxes levied by SARS:
Income tax – This is a main source of government income. It is levied on residents’ worldwide income. Individuals are taxed progressively. Businesses are taxed at a flat rate of 29%. There is also a 10% secondary tax on companies on all income distributed by way of dividends.
Value Added Tax (VAT) – Is an indirect tax levied at 14% except for exports and certain foodstuffs and services which are zero-rate.
Capital gains tax – Is levied on net capital gain at 25% for individuals and special trusts, and 50% for trusts and companies.
Skills development levy – levied at 1.0% of payroll payable by employers registered for employees’ tax or employers with an annual payroll in excess of R 250, 000.00,
Transfer duty – payable on land and buildings,
Stamp duty – payable on issue and transfer of shares, lease agreements and mortgage bonds,
Customs & excise taxes,
Unemployment insurance contribution.
Value Added Tax (VAT) of 14% is levied on goods and services excluding basic foodstuffs.
The following goods and services are subject to VAT at the zero-rate:
- Goods exported from South Africa where the vendor is liable for the transport of the goods to the foreign county
- Brown bread
- Brown wheaten meal
- Maize meal
- Mealie rice
- Dried mealies
- Dried beans
- Fruit and vegetables
- Pilchards and sardines in tins
- Milk, cultured milk and milk powder
- Cooking Oil
- Edible legumes and pulses of leguminous plants
- Dairy powder blends
- Petrol, diesel and illuminating paraffin
- Certain agricultural goods supplied to qualifiying VAT registered farmers
- Certain gold coins issued by the SA Reserve Bank, including Kruger rands
Services (including but not limited to)
- International transport and related services
- Payments by public / local authorities to welfare organisations
- Services supplied outside South Africa
Zero-rating implies that VAT at 0% is levied on supplies made by the vendor. VAT incurred on goods or services acquired by the vendor for purposes of making those supplies is claimable as input tax.
The following goods and services are exempt from VAT
- Financial services
- Passenger transport by rod and rail
- The rental of residential property
- Educational services in primary and secondary schools, universities and technikons.
- Interest and life insurance benefits
- Pension and similar institutions and medical schemes
- Medical services and medicines supplied by State and provincial hospitals and local authority clinics
- Child minding services in crèches and after-school centres.
VAT borne by foreign tourists may be refunded by the VAT refund Administrator (VRA) upon departure from South Africa. The tourist must be in possession or a valid tax invoice and have the goods available for inspection upon departure. An administration fee, subject to a minimum of R10 and a maximum of R250 is levied by the VRA for processing the claim.