Tax Guide 2024 – 2025

Foreword
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1
 INDEX
Administrative Penalties 53 Pre-Paid Expenditure 33
Arbitration Awards 15 Pre-Production Interest 32
Assessed Losses Ring-Fenced 49 Pre-Trading Expenditure 33
Body Corporates 50 Prime Overdraft Rates 42
Bond/Instalment Repayments 43 Provisional Tax 11
Broad-Based Employee Equity 22 Public Benefit Organisations 50
Budget Proposals 4 Recreational Clubs 50
Bursaries and Scholarships 22 Reinvestment Relief 31
Capital Gains Tax 28 Relocation of an Employee 20

Your vision is our ambition.

Capital Incentive Allowances 25 Reportable Arrangements 51
Common Reporting Standard 40 Research and Development 20
Country-by-Country Reporting 40 Residence Based Taxation 34
Debt Concession or Compromise 23 Residential Building Allowances 24
Deductions - Donations 50 Restraint of Trade 15
Deductions - Employees 13 Retention of Documents/Records 58
At PKF, your vision is the catalyst for our Deductions - Retirement 20 Retirement Lump Sum Benefits 21
joint ambition. Backed by the largest African Deductions - Royalties 37 Secondary Tax on Companies 6
Deductions - Travel Expenses 19 Securities Transfer Tax 41
presence measured by reach, our 8 firms Deemed Capital - Disposal of Shares 32 Skills Development Levy 44
and over 80 partners in South Africa are Deemed Employees 14 Small Business Corporations 9
Directors Fees 15 Solar Panel Rebate 4
perfectly placed to support your business. Dispute Resolution 52 Special Economic Zones 32
Dividend Stripping 31 Strategic Allowances 28
Dividends Tax 10 Subsistence Allowances 18
Our size means that we are agile and our Donations Tax 55 Tax Clearance 51
structure means that partners are accessible Double Taxation Agreements 36 Tax Free Investments 15
Doubtful Debt Allowance 33 Tax Rates - Companies 6
on every engagement. Trust PKF to take care Effective Tax Rate 6 Tax Rates - Individuals 7
of your audit, accounting, tax, and business Employment Tax Incentive 22 Tax Rates - Trusts 8
Estate Duty 55 Tax Rebates 7
advisory needs. Exchange Control Regulations 46 Tax Thresholds 7
Executor’s Remuneration 55 Third-Party Reporting 50
Exemptions - Individuals 13 Transfer Duty 42
Farming Income 45 Transfer Pricing 41
Foreign Companies/Branch Tax 6 Travel Allowances 18
Foreign Employment Income 5 Trust Distributions - Local Trust 54
Fringe Benefits 16 Trust Distributions - Foreign Trust 54
Headquarter Company 37 Turnover Tax - Micro-Businesses 8
Home Office Deduction 53 Two-Pot Retirement System 4
Hotel Allowances 24 Understatement Penalties 52
Interest Rates - Changes 44 Unquantified Proceeds 31
Involuntary Disposals 31 Value-Added Tax 48
IRP5 Codes 56 Variable Remuneration 19
Learnership Allowances 32 VAT Claw-Back for Developers 49
Limitation of Interest Deduction 23 VAT Relief - Inter-Group 49
Loans to Trusts - Section 7C 5 Venture Capital Investments 33
Married in Community of Property 15 Voluntary Disclosure 52
Medical Aid Tax Credits 7 Wear and Tear Allowances 26
Medical Expense Tax Credits 12 Withholding Taxes Summary 38
Multilateral Instrument 39 Withdrawal Lump Sum Benefits 21
Non-Residents 36 Withholding Tax on Interest 36
Patent and Intellectual Property 24 Withholding Tax on Royalties 37
pkf.co.za Penalties and Interest 43
3
 BUDGET PROPOSALS LOANS TO TRUSTS SECTION 7C
1 Increase in Tax for Individuals As from 1 March 2017, interest-free or low interest loans to a trust by a
Personal income tax is increased by not adjusting the tax brackets, connected natural person or by a company connected to that natural person
rebates and medical tax credits. give rise to a deemed donation. The donation is the difference between the
2 Global Minimum Corporate Tax interest rate charged and the official interest rate applied to the loan amount.
An effective tax rate of at least 15% is to be imposed on multinational This deemed donation applies to new and existing loans, excluding:
corporations with an annual revenue exceeding €750 million. • Loans to certain vesting and certain share incentive trusts
3 Alternative Dispute Resolution Proceedings • Loans to special trusts solely for the benefit of a person with a disability
The dispute resolution process will be reviewed to improve efficiency, • Loans to approved public benefit organisations
which may include allowing alternative dispute resolution proceedings • Loans funding a primary residence of that person or that person’s spouse
• Loans to small business funding entities
at the objection phase of a tax dispute. • Loans where transfer pricing rules apply
4 Local Electric Vehicle Production Incentive • Loans provided in terms of a Sharia compliant financing arrangement
As from 1 March 2026, manufacturers will be able to claim 150% • Loans subject to Dividends Tax
of qualifying investment on production capacity for electric and • Unpaid beneficiary distributions, subject to certain provisions which
hydrogen-powered vehicles in the first year of investment. may include a requirement that:
- the trust deed stipulates (or the trustees have the sole discretion to
SOLAR PANEL REBATE determine) the time and extent of payment of such vested amount
- the beneficiary has not entered into an agreement with the trustee
to retain such amount in the trust.
The individual who pays for new and unused solar panels is eligible for a
rebate of 25% of the cost (excluding installation, inverters and batteries), The interest foregone is treated as an ongoing annual donation by that person
capped at R15 000 per individual. The panels must be brought into use for the as at the end of the tax year. Donations Tax will be payable at the end of
first time in the period 1 March 2023 to 29 February 2024. March of each year. The annual Donations Tax exemption of R100 000 may
be claimed if not already utilised.
As from 19 July 2017, loans provided by natural persons to companies
TWO-POT RETIREMENT SYSTEM held by trusts or loans ceded to connected natural persons such as trust
beneficiaries are included.
As from 1 September 2024, retirement funds will be subject to the new As from 1 January 2021, certain preference shares issued to a connected
two-pot system which aims to minimise early withdrawals, while retaining the natural person are treated as deemed loans.
principle of exempting contributions and growth, but taxing withdrawals.
The “retirement pot” cannot be accessed before retirement. As from 1 January 2024, where the deemed donation is in a foreign currency
this is converted at the average exchange rate for the year of assessment.
The “savings pot” can be accessed with a single taxable withdrawal in any 12
month period, subject to tax at marginal rates. Example: An interest free loan of R2,5 million provided to a trust on 1 March
2023 and the loan remained constant during the year, the calculation is:
One-third of the total contribution goes to the “savings pot” and the balance to
the “retirement pot”. R
Loan 2 500 000,00
The fund balance as at 31 August 2024 will remain in the “vested pot”.
Withdrawals will be subject to tax according to the relevant lump sum table. Interest 1 March 2023 to 31 March 2023 (31/366 days) at 8,25% 17 469,26
Members may transfer the lesser of 10% of the fund balance or R30 000 from Interest 1 April 2023 to 31 May 2023 (61/366 days) at 8,75% 36 458,33
the “vested pot” to the “savings pot” as initial seed funding. Interest 1 June 2023 to 29 February 2024 (274/366 days) at 9,25% 173 121,58
Deemed donation 227 049,17
This booklet is published by PKF Publishers (Pty) Ltd for and on behalf of Less annual exemption 100 000,00
Net deemed donation at 29 February 2024 127 049,17
Donations Tax at 20% (due 31 March 2024) 25 409,83

• All information contained herein is believed to be correct at the time of publication,

21 February 2024. The contents should not be used as a basis for action without
further professional advice.
FOREIGN EMPLOYMENT INCOME
• While utmost care has been taken in the compilation of this publication no responsibility As from 1 March 2020, foreign employment income not exceeding R1,25 million
will be accepted for any inaccuracies, errors or omissions. is exempt, provided the person spends more than 183 days, of which at
• The information incorporates commentary from the budget speech but the legislation least 60 days is continuous, outside South Africa in any 12 month period
finally enacted may differ. commencing or ending during that year of assessment.
• Changes in rates of tax announced in the budget speech for the 2025 tax year become
effective only once the legislation is enacted by Parliament. Prior to 1 March 2020, foreign employment income was fully exempt provided
• Copyright subsists in this work. No part of this work may be reproduced in any form or the same days requirement was met.
by any means without the publisher’s written permission.
4 5
TAX RATES COMPANIES TAX RATES INDIVIDUALS - 2024
Income Tax Taxable income Rates of tax
For years of assessment ending during the following periods: R 0 - R 237 100 18% of each R1
1 April 1994 - 31 March 1999 35% R 237 101 - R 370 500 R 42 678 + 26% of the amount over R 237 100
1 April 1999 - 31 March 2005 30% R 370 501 - R 512 800 R 77 362 + 31% of the amount over R 370 500
R 512 801 - R 673 000 R121 475 + 36% of the amount over R 512 800
1 April 2005 - 31 March 2008 29%
R 673 001 - R 857 900 R179 147 + 39% of the amount over R 673 000
1 April 2008 - 28 February 2023 28% R 857 901 - R1 817 000 R251 258 + 41% of the amount over R 857 900
1 March 2023 - 31 March 2025 27% R1 817 001 + R644 489 + 45% of the amount over R1 817 000
SA Income - Foreign Company/Branch Tax
For years of assessment ending during the following periods: TAX RATES INDIVIDUALS - 2025
1 April 1999 - 31 March 2005 35%
Taxable income Rates of tax
1 April 2005 - 31 March 2008 34% R 0 - R 237 100 18% of each R1
1 April 2008 - 31 March 2012 33% R 237 101 - R 370 500 R 42 678 + 26% of the amount over R 237 100
1 April 2012 - 28 February 2023 28% R 370 501 - R 512 800 R 77 362 + 31% of the amount over R 370 500
1 March 2023 - 31 March 2025 27% R 512 801 - R 673 000 R121 475 + 36% of the amount over R 512 800
R 673 001 - R 857 900 R179 147 + 39% of the amount over R 673 000
Secondary Tax on Companies R 857 901 - R1 817 000 R251 258 + 41% of the amount over R 857 900
Dividend declared between 22 June 1994 and 13 March 1996 25% R1 817 001 + R644 489 + 45% of the amount over R1 817 000
Dividend declared between 14 March 1996 and 30 September 2007 12,5%
Dividend declared between 1 October 2007 and 31 March 2012 10% TAX THRESHOLDS
Dividends Tax Taxable income
2024 2025
Dividend paid or becomes due and payable from 1 April 2012 15%
Dividend paid or becomes due and payable from 22 February 2017 20% Persons under 65 R 95 750 R 95 750
Persons 65 and under 75 R148 217 R148 217
Persons 75 and over R165 689 R165 689
EFFECTIVE TAX RATE
1 Mar 2016 22 Feb 2017 1 Mar 2017 1 Mar 2023
to to to to TAX REBATES
21 Feb 2017 28 Feb 2017 28 Feb 2023 28 Feb 2025
Amounts deductible from the tax payable 2024 2025
R R R R Persons under 65 R17 235 R17 235
Persons 65 and under 75 R26 679 R26 679
Taxable income 100,00 100,00 100,00 100,00 Persons 75 and over R29 824 R29 824
Less: Normal tax 28,00 28,00 28,00 27,00
Available for distribution 72,00 72,00 72,00 73,00
Less: Dividend 72,00 72,00 72,00 73,00
MEDICAL AID TAX CREDITS
Retained 0 0 0 0
Monthly amounts deductible from tax payable 2024 2025
Total tax 38,80 42,40 42,40 41,60
Main member R364 R364
Normal tax 28,00 28,00 28,00 27,00
Main member with one dependant R728 R728
Dividends Tax 10,80 14,40 14,40 14,60
Main member with two dependants R974 R974
Effective rate 38,80% 42,40% 42,40% 41,60%
Each additional dependant qualifies for a credit of R246 (2023 : R234)
Assumes all profits are declared as a dividend subject to Dividends Tax. per month.
6 7
TAX RATES TRUSTS SMALL BUSINESS CORPORATIONS
Rate of tax 2015 2016-2017 2018-2025 Years of assessment ending between 1 April 2023 and 31 March 2024
All taxable income 40% 41% 45% Taxable income Rates of tax
Special trusts are taxed at the rates applicable to individuals, but are not R 0 - R 95 750 Nil
entitled to any rebate. The 40% inclusion rate for a taxable capital gain R 95 751 - R365 000 7% of the amount over R 95 750
applies to both types of special trusts. R365 001 - R550 000 R18 848 + 21% of the amount over R365 000
A special trust is one created: R550 001 + R57 698 + 27% of the amount over R550 000
• solely for the benefit of a person affected by a mental illness or serious
physical disability which prevents that person from earning sufficient Years of assessment ending between 1 April 2024 and 31 March 2025
income to maintain themselves. Where the person for whose benefit Taxable income Rates of tax
the trust was established dies prior to or on the last day of the year of
assessment the trust will no longer be regarded as a special trust R 0 - R 95 750 Nil
• as a testamentary trust established solely for the benefit of minor children R 95 751 - R365 000 7% of the amount over R 95 750
who are alive and related to the deceased on the date of death. Where R365 001 - R550 000 R18 848 + 21% of the amount over R365 000
the youngest beneficiary turns 18 years of age (2013 : 21) prior to or on R550 001 + R57 698 + 27% of the amount over R550 000
the last day of the year of assessment, the trust will no longer be regarded
as a special trust. Qualifying requirements:
• All shareholders or members throughout the year of assessment are
TURNOVER TAX MICRO-BUSINESSES natural persons who do not hold an interest in any other private company,
close corporation or co-operative other than those which:
Years of assessment ending between 1 March 2014 and 28 February 2015 - are inactive and have assets with a market value less than R5 000; or
- have taken steps to liquidate, wind-up or deregister (effective for years
Turnover Rates of tax of assessment commencing on or after 1 January 2011).
• Gross income for the year of assessment does not exceed R20 million
R 0 - R 150 000 Nil (2013 : R14 million).
R150 001 - R 300 000 1% of the amount over R 150 000 • Not more than 20% of the gross income and all capital gains consists
R300 001 - R 500 000 R 1 500 + 2% of the amount over R 300 000 collectively of investment income and income from the rendering of
R500 001 - R 750 000 R 5 500 + 4% of the amount over R 500 000 a personal service.
Investment income includes any annuity, interest, rental income from
R750 001 - R1 000 000 R 15 500 + 6% of the amount over R 750 000 immovable property, royalty or any income of a similar nature, local
dividends, foreign dividends (as from 1 April 2012) and any proceeds
Years of assessment ending between 1 March 2015 and 28 February 2025 derived from investment or trading in financial instruments (including
Turnover Rates of tax futures, options and other derivatives), marketable securities or
immovable property.
R 0 - R 335 000 Nil
Personal service includes any service in the field of accounting, actuarial
R335 001 - R 500 000 1% of the amount over R 335 000 science, architecture, auctioneering, auditing, broadcasting, consulting,
R500 001 - R 750 000 R 1 650 + 2% of the amount over R 500 000 draughtsmanship, education, engineering, financial service broking,
R750 001 - R1 000 000 R 6 650 + 3% of the amount over R 750 000 health, information technology, journalism, law, management, real estate
broking, research, sport, surveying, translation, valuation or veterinary
The simplified turnover-based tax system applies to qualifying sole proprietors, science, performed personally by any person who holds an interest in
partnerships and incorporated businesses with a turnover of less than R1 the company, close corporation or co-operative, except where such
million per year. small business corporation employs three or more unconnected full-time
The system is elective. For years of assessment commencing on or after employees for core operations throughout the year of assessment.
1 March 2012, a micro-business can voluntarily exit the system at the end of • The company, close corporation or co-operative is not a personal service
any year of assessment. However, once out of the system the taxpayer will provider or venture capital company.
not be permitted to re-enter. Where the business operates in a special economic zone the tax rate is the
Prior to this, a three year lock-in period existed for exit and re-entry into the lower of 15% or the rate determined in accordance with the tables.
system. Personal services rendered under employment-like conditions and Investment incentive
certain professional services are excluded from the system. The full cost of any asset used directly in a process of manufacture and
For years of assessment commencing on or after 1 March 2018, transitional brought into use for the first time on or after 1 April 2001, may be deducted in
measures were introduced to eliminate penalties when turnover exceeds the tax year in which the asset is brought into use. As from 1 April 2005,
R1 million and the micro-business is obliged to exit the system. all other depreciable assets may be written off on a 50/30/20 basis.
8 9
 DIVIDENDS TAX PROVISIONAL TAX
Dividends Tax is applicable to all South African resident companies as well First Year of Assessment
as non-resident companies listed on the JSE. Dividends Tax is borne by the Where a taxpayer has not been assessed previously, a reasonable estimate of
shareholder at a rate of 20% (prior to 22 February 2017 : 15%), subject to any the taxable income, and not merely a default of nil, must be made.
reduction in terms of a double taxation agreement. Tax on dividends in specie First Payment
remains the liability of the company declaring the dividend. The estimate of taxable income may not be less than the basic amount, unless
Exemptions from Dividends Tax circumstances justify a lower estimate.
South African resident companies, the Government, public benefit Second Payment
organisations (PBO’s), certain exempt bodies, closure rehabilitation trusts, A two-tier system applies depending on the taxpayer’s taxable income:
retirement funds, shareholders in a registered micro-business (provided the • Actual taxable income of R1 million or less
dividend does not exceed R200 000 in the year of assessment), are exempt To avoid any penalty the basic amount must be used. If a lower estimate is
from Dividends Tax. The exemption also applies to dividends in specie. used, this must be within 90% of the taxable income finally assessed.
As from 1 April 2012, any dividend that was subject to STC is also exempt. • Actual taxable income exceeds R1 million
A non-resident receiving a dividend from a non-resident company, which is To avoid any penalty the estimate must be within 80% of the taxable
listed on the JSE, is exempt from Dividends Tax. income, excluding retirement fund lump sums, finally assessed.
Withholding Tax Obligations If the above requirements are not met, a penalty of 20% is levied on the
difference between the estimated tax and 90% of the actual tax (if the taxable
The company declaring the dividend, other than dividends in specie, is income is R1 million or less), or 80% of the actual tax (if the taxable income
required to withhold the Dividends Tax on payment. Liability for withholding exceeds R1 million), less PAYE and provisional tax paid in the year of
tax shifts if the dividend is paid to a regulated intermediary which includes assessment. The penalty may be waived or reduced if the taxpayer can prove
central securities depository participants, brokers, collective investment that due care had been taken in seriously calculating the estimate.
schemes, approved transfer secretaries and linked investment service • Non-submission of a return
providers. Where the return is not submitted within four months of the due date, the
Dividends Tax can be eliminated or reduced upon the timely receipt of a estimate of taxable income is deemed to be nil.
written declaration that the shareholder is either entitled to an exemption or to
double taxation agreement relief and an undertaking that the shareholder will
Third Payment
Third provisional payments are only applicable to individuals and trusts with
inform the company should there be a change in circumstances. taxable income in excess of R50 000 and companies and close corporations
As from 1 July 2020, the written declaration and undertaking must be with taxable income in excess of R20 000.
renewed every five years from the date of the original declaration.
In the case of dividends in specie there is no withholding obligation, as the tax
Year of Death
As from 15 January 2020, no estimate is required for the period from the last
is the liability of the company declaring the dividend. provisional return up to date of death.
Dividend Definition Basic Amount
The definition includes all distributions to a shareholder, other than: As from 1 March 2015, the basic amount is the taxable income of the latest
• a reduction of contributed tax capital (CTC) preceding tax year, provided the assessment is issued at least 14 days prior to
• an issue of capitalisation shares the submission of the provisional tax return. If that assessment is for a tax year
• a general share buy-back by a JSE listed company older than 18 months, the basic amount is increased by 8% per year.
• an issue of shares as consideration for a share buy-back Permissible Reductions in the Basic Amount
• certain transfer pricing adjustments. Capital gains, retirement fund lump sums and certain severance benefits
A distribution of CTC must be recorded in writing by the directors prior to reduce the basic amount.
making the distribution. Estimates
Low Interest or Interest-Free Loans Where an estimate lower than the basic amount is used, capital gains must
There is a deemed dividend implication where a low interest or interest-free be included in that estimate and the taxpayer’s circumstances must justify a
lower estimate. Capital gains must be included in the second estimate if the
loan or advance is made by a company to a resident natural person or trust final taxable income is expected to exceed R1 million. SARS has the right to
connected to the company or to a person (other than a company) who is increase any estimate, to an amount considered reasonable.
connected to such natural person or trust. The deemed dividend is the
difference between the interest rate charged and the official interest rate Exemptions
applied to the loan amount and is treated as a cash dividend. Natural persons, excluding sole proprietors, are exempt if either:
• the taxable income does not exceed the tax threshold
Share Buy-back • the taxable income from dividends (e.g. REIT distributions), interest, foreign
Where an unlisted company buys back a portion of its own shares, the portion dividends, rental from letting immovable property and remuneration from an
distributed from CTC is subject to Capital Gains Tax and the remaining employer not registered for PAYE, does not exceed R30 000.
distribution is subject to Dividends Tax. Trusts with no taxable income are not provisional taxpayers.
The CTC distributed must be in proportion to the shareholder’s percentage Body corporates, deceased estates, PBO’s, recreational clubs, shareblocks
held in the specific class of shares on the date of the distribution. and small business funding entities are exempt from provisional tax.
10 11
 MEDICAL EXPENSE TAX CREDITS EXEMPTIONS INDIVIDUALS
Medical Aid Contributions • Dividends received or accrued from South African companies or JSE dual
Medical aid contributions may be claimed as a medical scheme fees tax credit listed non-resident companies are generally not subject to income tax.
against tax payable as follows: • Dividends or distributions received or accrued from a real estate
• R364 (2023 : R347) per month each for the taxpayer and the first dependant investment trust (REIT) are subject to income tax.
• R246 (2023 : R234) per month for each additional dependant • As from 1 March 2014, dividends received for services rendered or by
Where more than one person pays the medical aid contribution, the medical virtue of employment, including share incentive trust distributions, are not
scheme fees tax credit is apportioned. exempt subject to certain exclusions.
Younger than 65 years • For years of assessment commencing on or after 1 March 2017, foreign
Excess contributions and other qualifying medical expenses may be claimed as an dividends are partially exempt in terms of a formula whereby the
additional medical expense tax credit calculated as follows: maximum effective rate is 20% (previously 15%).
The amount by which the formula {[medical aid contributions - (medical scheme • Interest received by or accrued to a non-resident is exempt from income
fees tax credit x 4)] + other qualifying medical expenses} exceeds 7,5% of tax unless the individual was physically present in South Africa for a
taxable income, divided by a factor of 4. period exceeding 183 days in aggregate or carried on business through a
65 years and older, or younger than 65 years if the taxpayer or an permanent establishment in South Africa at any time during the 12 month
immediate family member has a disability period prior to the date of receipt or accrual. As from 1 March 2015, where
Excess contributions and other qualifying medical expenses may be claimed as an this exemption is applicable, a final withholding tax of 15% is imposed on
additional medical expense tax credit calculated as follows: interest paid to a non-resident, subject to an exemption or reduction in
{[Medical aid contributions - (medical scheme fees tax credit x 3)] + other qualifying the rate in terms of a double taxation agreement.
medical expenses}, divided by a factor of 3. • South African sourced interest received by natural persons:
Other qualifying medical expenses include: Persons under 65 years R23 800 (2013 : R22 800)
• payments to medical practitioners, nursing homes and hospitals Persons 65 years and older R34 500 (2013 : R33 000)
• payments to pharmacists for prescribed medicines • Unemployment insurance benefits.
• payments related to a disability or physical impairment including: • As from 1 March 2012, Road Accident Fund payouts.
- costs of special care (including training of parents or caregivers) • As from 1 March 2015, all returns from tax free savings investments.
- insurance, maintenance and supply of aids and special devices Termination Lump Sum from Employer
- prosthetics (including prosthetic breasts, limbs or eyes) As from 1 March 2011, employer provided severance payments for reasons
- special devices (including computers suitably adapted, kidney machines, of age, ill health and retrenchment are aligned with the taxation of retirement
mobile ramps, wheelchairs, crutches, orthopaedic shoes, pacemakers, lump sum benefits, including the R550 000 (2023 : R500 000) tax free limit.
prescription spectacles and contact lenses) In the case of retrenchment this concession does not apply where that person
- alterations to assets (including doorways, elevators and outdoor ramps) at any time held an interest of more than 5% in that entity.
- special education for learners with disabilities (including fees for a school
assistant, classroom costs and school fees). School fees are limited to the Compensation
amount in excess of the fees of the closest public fee-paying school As from 1 March 2007, compensation awards paid by an employer on the
- certain services costs (including deaf-blind intervening services, lip-reading death of an employee in the course of employment are exempt, limited to
services, rehabilitative therapy and sign language) and service animals R300 000. As from 1 March 2011, previous retrenchment exemptions are no
- certain reasonable travel expenses (including accommodation) longer set-off against this amount.
- continence products (including catheters, diapers and disposable briefs).
Disability means a moderate to severe limitation of a person’s ability to function
or perform daily activities due to physical, sensory, communication, intellectual or
DEDUCTIONS EMPLOYEES
mental impairment, provided the limitation lasts more than a year and is diagnosed Employees or holders of office are limited to the following deductions from
by a duly registered medical practitioner in accordance with prescribed criteria. their remuneration:
According to the SARS guide on the medical tax credits (issue 15): • Bad debts and doubtful debts allowance
• diabetes and asthma are regarded as medical conditions and not disabilities • Wear and tear allowance
• bad eyesight, hearing problems, paralysis of a portion of the body and brain • Business travel expenses limited to the travel allowance or fringe benefit
dysfunctions (including dyslexia, hyperactivity or lack of concentration) are for the use of a company motor vehicle
regarded as physical impairments and not disabilities. • Pension or retirement annuity fund contributions, subject to a limitation
GAP cover and medical insurance premiums do not qualify as medical aid • As from 1 March 2016, provident fund contributions, subject to a limitation
contributions or as other qualifying medical expenses. • Donations to qualifying public benefit organisations, subject to a limitation
Recovery of expenses (including amounts received from a medical aid savings • Home office expenses, subject to stringent requirements
account, GAP cover or medical insurance) reduces the claim. • Legal expenses, subject to certain requirements
Expenditure paid by a taxpayer on behalf of a spouse, child or parent must be • Prior to 1 March 2015, premiums paid for an income protection policy
claimed by the taxpayer who paid the expense. • As from 1 March 2008, refunded awards for services rendered and
refunded restraint of trade awards.
12 13
 DEEMED EMPLOYEES TAX FREE INVESTMENTS
Labour brokers and personal service providers are regarded as deemed As from 1 March 2015, natural persons can invest in approved investments
employees. which include unit trusts, fixed deposits or REIT’s. These investments are
subject to a lifetime investment limit of R500 000, and an annual investment
For years of assessment commencing on or after 1 March 2009: limit of R36 000 (2020 : R33 000).
• A labour broker is a natural person who, for reward, provides a All proceeds, including interest, dividends and capital gains on the disposal of
client with other persons to render a service to the client or these investments, are fully exempt from tax.
procures other persons for the client and remunerates such Where the annual or lifetime limits are exceeded, a penalty of 40% of the
excess capital contributed is imposed.
persons
• A personal service provider is a company, close corporation or
trust where any service rendered on behalf of the entity to its client
MARRIED IN COMMUNITY OF PROPERTY
is rendered personally by any person who is a connected person in Taxpayers married in community of property are taxed on half of their own
relation to such entity, and one of the following provisions apply: interest, dividends, rental income and capital gain and half of the interest,
dividends, rental income and capital gain of their spouse, regardless of the
- the person would have been regarded as an employee of the spouse in whose name the assets are registered (other than assets excluded
client if the service was not rendered through an entity from the joint estate).
- the person or entity rendering the service must perform such All other taxable income is taxed only in the hands of the spouse who re-
ceived it or to whom it accrues.
service mainly at the premises of the client and such person or
entity is subject to the control or supervision of such client as to
the manner in which the duties are performed ARBITRATION AWARDS
- more than 80% of the income derived from services rendered is Arbitration awards are generally awarded due to unfair dismissal, termination
received from one client or associated person in relation to the of the employment contract prior to the expiry date or unfair labour practices.
client Amounts paid due to unfair dismissal and early termination of the contract
constitute remuneration and are taxable.
• The entity will not be regarded as a personal service provider
where such entity employs three or more unconnected full-time
employees for core operations throughout the year of assessment.
RESTRAINT OF TRADE
Gross Income
Implications Any amount received by or accrued to any natural person, labour broker or
• A labour broker, not in possession of an exemption certificate, is personal service provider for a restraint of trade imposed on such person,
subject to PAYE on income received at the rates applicable to is included in gross income in the year of receipt or accrual.
individual taxpayers. Deductible expenditure is limited to Deduction
remuneration paid to employees Where an expense was incurred in respect of a restraint of trade imposed on
any person, the deduction, in a year of assessment, is limited to the lesser of:
• A personal service provider is subject to PAYE at the rate of • the expense apportioned over the period for which the restraint applies
27% (prior to 1 April 2022: 28%) in the case of a company and 45% • one-third of the amount incurred per year.
(2017 : 41%) in the case of a trust Where the expense did not constitute income in the hands of the recipient, no
• No PAYE is required to be deducted in certain instances, where deduction is allowed.
the entity provides an affidavit confirming that the entity does not
receive more than 80% of its income from one source DIRECTORS FEES
• The deemed employee may apply to SARS for a tax directive for a Prior to 1 March 2017, directors of private companies and members of close
lower rate of tax to be applied corporations were deemed to have received a monthly remuneration, subject
• Deductions available to personal service providers are limited to to PAYE, calculated in accordance with a formula, which did not apply where at
least 75% of their remuneration was in the form of fixed monthly payments.
remuneration to employees, contributions to pension, provident and
benefit funds, legal expenses, bad debts, expenses in respect of As from 1 March 2017, this formula is no longer applicable and PAYE is
calculated on a payment basis.
premises, finance charges, insurance, repairs, fuel and maintenance
As from 1 June 2017, resident non-executive directors are regarded as
in respect of assets used wholly and exclusively for trade and any independent contractors, resulting in no PAYE being withheld from directors
amount previously included in taxable income and subsequently fees, unless voluntarily agreed to. Where the fees exceed R1 million in a
refunded by the recipient. 12 month period, the non-executive director is required to register for VAT and
issue a tax invoice to the company for the directors fees.
14 15
 Long Service and Bravery Awards
FRINGE BENEFITS Long service is an initial unbroken period of at least 15 years or any subsequent
unbroken period of at least 10 years.
Right of Use of Motor Vehicle No value is placed on any award, including cash, not exceeding R5 000.
As from 1 March 2015, for vehicles acquired or financed, the determined value Prior to 1 March 2022, cash awards were taxable.
for the fringe benefit is the retail market value (previously cost) including VAT
but excluding finance charges and interest. The employee will be taxed on 3,5% Medical Aid Contributions
(2011 : 2,5%) per month of the determined value of the motor vehicle less any As from 1 March 2010, the full contribution by an employer is a fringe benefit.
consideration paid by the employee towards the cost of the vehicle. If the employer makes a lump sum payment for all employees, the fringe
The fringe benefit is reduced to 3,25% if the vehicle is subject to a maintenance benefit is determined in accordance with a formula, which will have the effect of
plan for not less than three years and/or 60 000 kilometres. apportionment amongst all employees concerned.
No value is placed on the contributions made for an employee who retired due to
As from 1 March 2013, for vehicles acquired under an operating lease, the value superannuation or ill health, or for dependants of a deceased employee.
of the fringe benefit is based on the rental and fuel cost to the employer.
Where an employee is given the use of more than one vehicle and can prove Holiday Accommodation
that each vehicle is used primarily for business purposes, the value placed on The employee is taxed on the prevailing market rental where the property is
the private use of all the vehicles is determined according to the value owned by the employer or rented from an associated entity, or the actual rental
attributed to the vehicle carrying the highest value of private use. where the employer rents the accommodation from a third party.
For PAYE purposes the employer is required to include in the employee’s Residential Accommodation
monthly remuneration 80% of the taxable benefit. The inclusion rate may be The value of the fringe benefit to be taxed is the rental value less any
reduced to 20% if the employer is satisfied that at least 80% of the use of the consideration paid by the employee. As from 1 March 2015, where the
vehicle for a year of assessment will be for business purposes. accommodation is not owned by the employer but by an unconnected person,
On assessment SARS is obliged, provided it is satisfied that accurate records the rental value is the lower of the formula value or the arm’s length rental.
have been maintained in respect of distances travelled for: As from 1 March 2008, no value is placed on the benefit where:
• business purposes, to reduce the value of the fringe benefit by the same • the supply of any accommodation is to an employee away from his usual
proportion that the business distance bears to the total distance travelled place of residence in South Africa for the performance of his duties
during the year of assessment • the supply of any accommodation in South Africa to an employee away
• private purposes and the employee has borne the full cost of the specified from his usual place of residence outside South Africa is for a two year
vehicle running expenses, to reduce the value of the fringe benefit: period, subject to a limit of R25 000 per month. This concession does not
- by the same proportion that the private distance bears to the total apply if the employee was present in South Africa for more than 90 days in
distance travelled during the year of assessment, in the case of the tax year prior to the date of arrival for the purpose of his duties.
licence, insurance and maintenance costs Employer-Owned Insurance Policies
- by applying the prescribed rate per kilometre to the kilometres travelled As from 1 March 2012, any premium paid by an employer under an employer-
for private purposes in the case of the fuel cost pertaining to private use. owned insurance policy (group life or disability plan), directly or indirectly, for
No value is placed on the private use of an employer-owned vehicle if: the benefit of the employee, spouse, child, dependant or nominee is taxed in the
• it is available to and used by all employees, private use is infrequent and hands of the employee as a fringe benefit. If the employer makes a lump sum
incidental to the business use, and the vehicle is not normally kept at or payment for all employees, the fringe benefit is determined in accordance with
near that employee’s residence when not in use outside business hours a formula, which will have the effect of apportionment amongst all employees
• the nature of the employee’s duties requires regular use of the vehicle for concerned.
the performance of duties outside normal hours of work and private use Uniform Allowance
is infrequent or incidental to business use or limited to travel between An employer may provide a uniform to an employee or an allowance in order
place of residence and place of work. to purchase such uniform. No value is placed on the fringe benefit, provided
The provision of an employer-owned vehicle constitutes a deemed supply for that the employee is required to wear the uniform while on duty and it is
VAT purposes. The employer must account for output VAT on the deemed clearly distinguishable from ordinary clothing.
consideration by applying the VAT fraction on a monthly basis.
Free or Subsidised Meals and Refreshments
The deemed consideration is determined as follows:
Free or subsidised meals provided by the employer give rise to a fringe benefit,
Motor vehicle/Double-cab 0,3% of cost of vehicle (excl. VAT) per month valued at the cost to the employer less any consideration paid by the employee.
Bakkies 0,6% of cost of vehicle (excl. VAT) per month
No value is placed on the benefit if it is provided at a place mainly or wholly
Use of Business Cellphones and Computers used by the employees or at the employer’s premises, or it is provided during
As from 1 March 2008, no value is placed on the private use by employees of business hours (normal or extended) or on a special occasion.
employer-owned cellphones and computers which are used mainly for business Low-Cost Housing Transferred to Employee
purposes.
No value is placed on interest-free or low interest loans granted solely to
Low Interest or Interest-Free Loans acquire fixed property or if fixed property is transferred to an employee where all
• The fringe benefit is the difference between the interest rate charged by of the following are applicable:
the employer and the official interest rate applied to the loan amount • the market value of the property does not exceed R450 000
• The fringe benefit has no value where the loan is less than R3 000 or where • the employee’s annual remuneration does not exceed R250 000
a loan is made to an employee to further their own studies. • the employee is not a connected person in relation to the employer.
16 17
SUBSISTENCE ALLOWANCES DEDUCTIONS TRAVEL EXPENSES
If an employee is obliged to spend at least one night away from his usual place The deduction in respect of business travel is limited to the allowance granted
of residence in South Africa on business, the employer may pay an allowance and may be determined using actual expenditure incurred or on a deemed
for personal subsistence and incidental costs without such amounts being cost per kilometre basis in accordance with the table below.
included in the employee’s taxable income.
Accurate records of the opening and closing odometer readings must be
Where this allowance is paid to an employee and that employee does not maintained in all circumstances.
travel for business purposes by the end of the following month, the allowance As from 1 March 2010, the claim must be based on the actual distance
becomes subject to PAYE in that month. travelled for business purposes, supported by a detailed log book.
The following amounts are deemed to have been incurred by an employee in The cost of the vehicle includes VAT but excludes finance costs.
respect of a subsistence allowance:
Where actual expenditure is used the value of the vehicle is limited to
Local Travel R800 000 (2024 : R800 000) for purposes of calculating wear and tear, which
• R169 (2024 : R161) per day or part of a day for incidental costs must be spread over a seven year period.
• R548 (2024 : R522) per day or part of a day for meals and incidental costs. The finance costs are also limited to a debt of R800 000 (2024 : R800 000).
Where an allowance is paid to an employee to cover accommodation, meals In the case of a leased vehicle, the instalments in any year of assessment
and incidental costs, the employee is required to prove the expense incurred may not exceed the fixed cost component in the table.
while away on business, which is limited to the allowance received.
Overseas Travel DEEMED EXPENDITURE - 2024
Actual accommodation expenses plus an allowance per country as set out on Fixed
www.sars.gov.za (2009 : $215) per day for meals and incidental costs incurred Cost of vehicle Fuel Repairs
R c c
outside South Africa. Where the absence is for a continuous period in excess of
six weeks, the deemed expenditure does not apply. Does not exceed R100 000 33 760 141,5 43,8
Exceeds R100 000 but not R200 000 60 329 158,0 54,8
Reimbursive Subsistence Expenses
As from 1 March 2021, where an employee is obliged to be away from the office Exceeds R200 000 but not R300 000 86 958 171,7 60,4
on a day trip, any reimbursements paid by an employer in respect of meals and Exceeds R300 000 but not R400 000 110 554 184,6 65,9
incidental costs are not included in the employee’s taxable income provided the Exceeds R400 000 but not R500 000 134 150 197,6 77,5
employer’s policy allows for such reimbursements and the reimbursed amount Exceeds R500 000 but not R600 000 158 856 226,6 91,0
does not exceed R169 (2024 : R161).
Exceeds R600 000 but not R700 000 183 611 230,5 102,1
TRAVEL ALLOWANCES Exceeds R700 000 209 685 234,3 113,1

Fixed Travel Allowances DEEMED EXPENDITURE - 2025 (updated table not available at time of publication)
As from 1 March 2010, 80% of the fixed travel allowance is subject to PAYE.
As from 1 March 2011, where the employer is satisfied that at least 80% of the
Cost of vehicle Fixed Fuel Repairs
use of the vehicle in the year of assessment will be for business purposes, the R c c
inclusion rate may be reduced to 20%. The full allowance is disclosed on the Does not exceed R100 000 33 760 141,5 43,8
employee’s IRP5 certificate, irrespective of the percentage of business travel.
Exceeds R100 000 but not R200 000 60 329 158,0 54,8
Reimbursive Travel Expenses
Exceeds R200 000 but not R300 000 86 958 171,7 60,4
No PAYE is deductible where an employee receives a reimbursement based on
the actual business kilometres travelled, no other travel allowance is paid to the Exceeds R300 000 but not R400 000 110 554 184,6 65,9
employee and the cost is calculated in accordance with the prescribed rate. Exceeds R400 000 but not R500 000 134 150 197,6 77,5
The amount is not subject to tax on assessment. Exceeds R500 000 but not R600 000 158 856 226,6 91,0
Where the reimbursive rate paid by the employer does not exceed the prescribed Exceeds R600 000 but not R700 000 183 611 230,5 102,1
rate but another travel allowance is paid, the allowances are combined and Exceeds R700 000 209 685 234,3 113,1
treated as a fixed travel allowance.
Where the reimbursive rate paid by the employer exceeds the prescribed rate
of 464 cents (2024 : 464 cents) per kilometre, irrespective of the business VARIABLE REMUNERATION
kilometres travelled, there is an inclusion in remuneration for PAYE purposes.
The excess amount is subject to PAYE unlike the fixed travel allowance where Variable remuneration, such as commission, bonuses, overtime, leave
only 80% of the amount is subject to PAYE. pay, night shift or standby allowances and reimbursive travel, is taxed on a
payment basis.
Example: 17 891 kilometres are reimbursed for business travel at 500 cents. As from 1 March 2023, this includes performance-based remuneration. The
The prescribed rate is 464 cents. The amount included in remuneration is rule applies to the deduction of PAYE, the employee’s gross income inclusion
calculated as 17 891 x (500 cents less 464 cents) = R6 440,76. and the employer’s income tax deduction.
18 19
RELOCATION OF AN EMPLOYEE RETIREMENT LUMP SUM BENEFITS
Where the employer incurs expenses for the relocation of an employee or where As from 1 October 2007, the taxable portion of a lump sum from a pension,
the employee is reimbursed, the following expenses are not a fringe benefit: provident or retirement annuity fund on retirement or death is the lump sum less
• transportation of the employee, their family and personal possessions any contributions that have not been allowed as a tax deduction plus the tax-
• rental of temporary residential accommodation for the employee and their able portion of all lump sums previously received. As from 1 March 2011,
family for up to 183 days after transfer certain severance benefits are also taxed in accordance with this table.
• settling-in costs, including new school uniforms, replacement curtains,
motor vehicle registration fees and utility connection fees This amount is subject to tax at the following rates less any tax on the
• costs relating to the sale of the previous residence, including bond previous lump sums which is calculated in accordance with the current
cancellation fees, commission and legal fees, and the cost of bond table regardless of the tax actually paid on that lump sum:
registration of the new residence, legal fees and transfer duty. Lump sums accruing between 1 March 2014 and 28 February 2023
The loss on sale of the previous residence and architect’s fees for the design
of, or alterations to, a new residence are excluded. Taxable portion of lump sum Rates of tax
As from 22 November 2017, the actual cost must be reflected on the IRP5 R 0 - R 500 000 Nil
under code 3714. Previously one month’s basic salary could be deemed as the R 500 001 - R 700 000 18% of the amount over R 500 000
relocation allowance.
R 700 001 - R1 050 000 R 36 000 + 27%of the amount over R 700 000
R1 050 001 + R130 500 + 36%of the amount over R1 050 000
RESEARCH AND DEVELOPMENT
An assessed loss cannot be set-off against the taxable lump sum.
An additional deduction of 50% is available for expenditure incurred in respect
of qualifying research and development and as from 1 January 2014: Lump sums accruing between 1 March 2023 and 28 February 2025
• Research and development excludes, amongst others:
- internal business processes that are used by connected parties Taxable portion of lump sum Rates of tax
- routine testing, analysis, collecting of information and quality control R 0 - R 550 000 Nil
- market research, market testing or sales promotion R 550 001 - R 770 000 18% of the amount over R 550 000
- the creation or development of financial instruments or products
- the creation or enhancement of trademarks or goodwill. R 770 001 - R1 155 000 R 39 600 + 27%of the amount over R 770 000
• The Department of Science and Technology must approve the entire R1 155 001 + R143 550 + 36%of the amount over R1 155 000
150% deduction. Only expenditure incurred on or after the date of receipt An assessed loss cannot be set-off against the taxable lump sum.
of the application is eligible for this deduction.
Research and development capital assets are written off as follows:
- new and unused machinery or plant on a 50/30/20 basis (prior to
1 January 2012: 40/20/20/20)
WITHDRAWAL LUMP SUM BENEFITS
- buildings or improvements at 5% per year. As from 1 March 2009, the taxable portion of a pre-retirement lump sum from
a pension or provident fund is the amount withdrawn less any transfer to a new
DEDUCTIONS RETIREMENT fund plus all withdrawal lump sums previously received.
The contributions to pension, provident and retirement annuity funds are deductible This amount is subject to tax at the following rates less any tax on the
but limited to the lesser of: previous lump sums which is calculated in accordance with the current
• R350,000 table regardless of the tax actually paid on that lump sum:
• 27.5% of the greater of: Lump sums accruing between 1 March 2014 and 28 February 2023
- Remuneration (excluding retirement, withdrawal or severance lump sums)
- Taxable income (excluding retirement, withdrawal or severance lump sums) Taxable portion of withdrawal Rates of tax
prior to the deduction of donations and foreign tax.
• Taxable income (excluding retirement, withdrawal or severance lump sums and R 0 - R 25 000 Nil
taxable capital gains) prior to the deduction of donations and foreign tax. R 25 001 - R660 000 18% of the amount over R 25 000
Any excess contributions may be carried forward to the subsequent tax year. R660 001 - R990 000 R114 300 + 27% of the amount over R660 000
Contributions paid by the employer are taxed as a fringe benefit in the hands of R990 001 + R203 400 + 36% of the amount over R990 000
the employee and are deemed to be contributions paid by the employee in order to
calculate the allowable deduction. An assessed loss cannot be set-off against the taxable lump sum.
The employer’s deduction for contributions made to these funds on the
employee’s behalf is not subject to any limitation (2016 : 20% of remuneration). Lump sums accruing between 1 March 2023 and 28 February 2025
Annuitisation Rules Taxable portion of withdrawal Rates of tax
Pension and retirement annuity funds are subject to the one-third lump sum and the
two-thirds annuity rules unless the lump sum is R247 500 or less (2016 : R75 000). R 0 - R 27 500 Nil
As from 1 March 2021, lump sums from provident funds are subject to annuitisation R 27 501 - R 726 000 18% of the amount over R 27 500
and apportioned to ensure contributions made prior to 1 March 2021 and the R 726 001 - R1 089 000 R125 730 + 27% of the amount over R 726 000
resultant growth may be paid out as a lump sum. R1 089 001 + R223 740 + 36% of the amount over R1 089 000
Where the member was at least 55 years old on 1 March 2021, the lump sum from
the provident fund is not subject to the annuitisation rules. An assessed loss cannot be set-off against the taxable lump sum.
20 21
EMPLOYMENT TAX INCENTIVE LIMITATION OF INTEREST DEDUCTION
As from 1 January 2014, a special incentive is allowed as a credit against the
employer’s monthly PAYE payment. To qualify for the incentive:
Debt arising as a result of a corporate restructure
• Employers must
As from 1 January 2015, the interest deduction in respect of certain corporate
restructures may be limited and calculated in accordance with a formula.
- be registered for PAYE and be tax compliant
- not be the Government, a municipal entity or a public entity Any excess interest cannot be carried forward to the next tax year. As a result the
- not have been disqualified by the Minister of Finance excess interest is permanently non-deductible.
• Employees must The interest deduction limitation must be applied in the tax year in which the
- have a South African ID book/card or asylum seeker permit
restructure transaction is entered into and in the five subsequent tax years.
- be at least 18 years old and not older than 29 years Recipient of interest is not subject to tax in South Africa
- not be a domestic worker or connected to the employer As from 1 January 2015, the deduction of interest paid to an exempt entity or
- earn at least R2 000 per month or the minimum amount stipulated by the foreign loanholder (who is not subject to tax in South Africa) may be limited and
regulated industry but not more than R6 500 per month calculated in accordance with a formula.
- be employed on or after 1 October 2013 Any excess is carried forward to the next tax year, and is subject to the formula
- be subject to the Basic Conditions of Employment Act as from 1 March 2022 in that year.
- not be mainly involved in the activity of studying as from 1 March 2022. This will generally apply in the case of:
As from 1 March 2022, the credit for each qualifying employee is as follows: • interest paid to an exempt lender, such as a PBO
Monthly Per month during the first Per month during the next • interest paid to a foreign loanholder where the withholding tax on interest is
Remuneration 12 months of employment 12 months of employment reduced to nil in terms of a double taxation agreement.
R 0 - R1 999 75% of monthly remuneration 37,5% of monthly remuneration For years of assessment ending on or after 31 March 2023, the limitation also
R2 000 - R4 499 R1 500 R750 applies to interest paid to a foreign loanholder taxed at a reduced rate.
R4 500 - R6 500 R1 500 - (0,75 x (Monthly R750 - (0,375 x (Monthly This limitation is only applicable when the parties involved are in a controlling
Remuneration - R4 500)) Remuneration - R4 500)) relationship, whereby the recipient directly or indirectly holds more than 50% of
the equity shares or voting rights in that company.
As from 1 March 2015, where an employee is employed on a full-time basis
for at least 160 hours per month (excluding overtime hours), an employer is
entitled to claim the full incentive. Where less than 160 hours are worked, the
incentive must be apportioned pro-rata.
DEBT CONCESSION OR COMPROMISE
Where the credit exceeds the PAYE liability of the employer, the excess As from 1 January 2013, a concession or compromise of debt is determined in
amount is refundable provided the employer is tax compliant. accordance with the purpose of the debt funding.
As from 1 March 2017, monthly claims can only be made up to the date of each Where the debt funded:
six monthly reconciliation. • a capital asset which has not been disposed of:
The incentive ceases to apply from 28 February 2029. - the base cost of that asset is reduced
- future allowances are limited to the reduced base cost
BURSARIES AND SCHOLARSHIPS - to the extent that the debt reduction exceeds the base cost any
capital loss is reduced
Bona fide scholarships or bursaries granted to enable any person to study at a • a capital asset which has been disposed of:
recognised educational institution are exempt from tax provided there is no element - any capital loss is reduced
of salary sacrifice. Where the benefit is granted to an employee, the exemption will - if no capital loss is available for reduction, a capital gain is included
not apply unless the employee agrees to reimburse the employer in the event that • an allowance asset which has not been disposed of:
the studies are not completed. - the base cost of that asset is reduced
Where the benefit is granted to a relative of the employee, the exemption will only - to the extent that the debt reduction exceeds the base cost a
apply if the annual remuneration proxy in the prior year of the employee is less than recoupment, limited to previous allowances granted, is recognised
R600 000 (2017 : R400 000) and to the extent that the bursary does not exceed as income
R60 000 (2017 : R40 000) per relative for higher education and • an allowance asset, which has been disposed of:
R20 000 (2017 : R15 000) per relative for basic education to grade 12. - a recoupment arises but is limited to previous allowances granted
As from 1 March 2018, where the benefit is granted to a relative with a disability, • trading stock:
the exemption will apply to the extent that the bursary does not exceed R90 000 per - reductions are made to opening stock, purchases and/or closing stock
relative for higher education and R30 000 per relative for basic education. depending on whether the stock was brought forward from the previous
tax year, purchased in the current tax year or has not been disposed of
BROAD-BASED EMPLOYEE EQUITY in the current tax year
• deductible expenditure:
Employer companies may issue qualifying shares up to a cumulative limit of - a recoupment is recognised as income.
R50 000 (2008 : R9 000) per employee in respect of the current tax year and
the immediately preceding four (2008 : two) tax years. The tax deduction is Certain transactions, subject to specific criteria, are excluded or partially
limited to a maximum of R10 000 (2008 : R3 000) per year per employee. excluded from these provisions such as transactions involving deceased
There are no tax consequences for the employee, other than a taxable capital estates, donations, groups of companies, fringe benefits and companies in
gain, provided the employee does not sell the shares for at least five years. liquidation.
22 23
 PATENT AND INTELLECTUAL PROPERTY CAPITAL INCENTIVE ALLOWANCES
A taxpayer may claim an allowance for the cost of acquiring any invention, Asset type Conditions for annual allowance Annual allowance
patent, design, copyright, other property of a similar nature or knowledge
connected with the use of such patent, design, copyright or other property or Industrial buildings Construction of buildings or improvements on 5% of cost
the right to have such knowledge imparted. or improvements or after 1 January 1989, where a building is used (previously 2%)
(note 1) wholly or mainly for a process of manufacture (note 2)
Where the cost exceeds R5 000, the allowance is limited to:
or similar process or research and development.
• 5% of the cost of any invention, patent, copyright or other Construction of buildings or improvements on or 10% of cost
property of a similar nature
after 1 July 1996 to 30 September 1999 and the (note 2)
• 10% of the cost of any design or other property of a similar nature.
buildings or the improvements are brought into
Where the intangible asset was acquired from a connected person the allowance use before 31 March 2000 and used in a process
is limited to the cost to the connected seller less allowances claimed by the seller of manufacture or similar process
plus recoupments and taxable capital gain included in the seller’s income.
New commercial Any cost incurred in erecting any new and unused 5% of cost
No allowance is allowed in respect of any expenditure incurred for the acquisition
buildings (other than building, or improving an existing building on or
of any trademark or property of a similar nature on or after 29 October 1999.
residential after 1 April 2007 wholly or mainly used for the
accommodation) purposes of producing income in the course of
HOTEL ALLOWANCES (note 3) trade
Building in an urban Costs incurred in erecting, demolishing or 20% in first year
Asset type Conditions for annual allowance Annual allowance
development zone extending a building, excavating land, providing 8% in each of
Hotel buildings Construction of buildings or improvements, 5% of cost (note 3) water, power, parking, drainage, security, waste 10 subsequent years
provided used in trade as hotelkeeper or used disposal or access
by lessee in trade as hotelkeeper Improvements to existing buildings 20% of cost
Refurbishments which commenced on or 20% of cost Aircraft Acquired on or after 1 April 1995 20% of cost (note 2)
after 17 March 1993
Farming equipment Machinery, implements, utensils or articles 50% in first year
Hotel equipment Machinery, implements, utensils or articles 20% of cost and assets used (other than livestock) brought into use on or 30% in second year
brought into use on or after 16 December 1989 in production of after 1 July 1988. Bio-diesel plant and machinery 20% in third year
Refurbishment is defined as any work undertaken within the existing building framework renewable energy brought into use after 1 April 2003
Ships South African registered ships used for 20% of cost
RESIDENTIAL BUILDING ALLOWANCES

prospecting, mining or as a foreign-going
ship, acquired on or after 1 April 1995
(note 2)

Asset type Conditions for annual allowance Annual allowance Plant and machinery New or unused manufacturing assets acquired 40% in 1st year
(note 1) on or after 1 March 2002 are subject to 20% in each of the
Residential Buildings erected on or after 1 April 1982 and 2% of cost and an
allowances over four years 3 subsequent years
buildings before 21 October 2008 consisting of at least initial allowance of
(note 4)
five units of more than one room intended for 10% of cost
Used manufacturing assets 20% of cost
letting, or occupation by bona fide full-time
employees Plant and machinery Plant or machinery brought into use for the first 100% of cost
(small business time by that taxpayer on or after 1 April 2001 and
New and unused buildings acquired, erected or 5% of cost or 10%
improved on or after 21 October 2008 if situated of cost for low cost corporations only) used directly in a process of manufacture
anywhere in South Africa and owned by the tax- residential units not Non-manufacturing Acquired on or after 1 April 2005 50% in first year
payer for use in his trade, either for letting or as exceeding R300 000 assets (small business 30% in second year
employee accommodation. Enhanced allowances for a stand-alone unit corporations only) 20% in third year
are available where the low cost residential unit or R350 000 in the
Licences
Expenditure, other than for infrastructure, Evenly over the
is situated in an urban development zone case of an apartment
to acquire a licence from a goverment period of the licence,
Employee 50% of the costs incurred or funds advanced or R6 000 prior to body to carry on telecommunication services, subject to a
housing donated to finance the construction of housing 1 March 2008 exploration, production or distribution of maximum of
for employees on or before 21 October 2008 R15 000 between petroleum or the provision of gambling facilities 30 years
subject to a maximum per dwelling 1 March 2008 and
20 October 2008 Notes
1 As from 1 April 2012, new or unused assets or buildings used for the purpose of
Employee Allowance on amounts owing on interest free 10% of amount
research and development also qualify for the allowances
housing loan account in respect of low cost residential owing at the end
2 Recoupments of allowances can be deducted from the cost of the replacement asset
loans units sold at cost by the taxpayer to employees of each year of 3 Allowances available to owners as users of the building or as lessors
and subject to repurchase at cost only in case of assessment. This ends 4 Where plant and machinery is used in a process of manufacture or a similar process,
repayment default or termination of employment on 28 February 2022 the taxpayer is obliged to make use of the allowances and not the wear and tear rates.

24 25
 Type of No. of years Type of No. of years
WEAR AND TEAR ALLOWANCES asset for write-off asset for write-off
The following rates of wear and tear are allowed by SARS in terms of Magnetic resonance imaging 5 Runway lights 5
(MRI) scanners Sanders 6
Interpretation Note 47 (issue 5): Medical theatre equipment 6 Scales 5
Type of No. of years Milling machines 6 Security systems (removable) 5
Type of No. of years Mobile caravans 5 Seed separators 6
asset for write-off asset for write-off Mobile cranes 4 Sewing machines 6
Adding machines 6 Drills 6 Mobile refrigeration units 4 Shakers 4
Air-conditioners Electric saws 6 Motors 4 Shopfittings 6
window 6 Electrostatic copiers 6 Motorcycles 4 Solar energy units 5
mobile 5 Engraving equipment 5 Motorised chain saws 4 Special patterns and tooling 2
room unit 10 Escalators 20 Motorised concrete mixers 3 Spin dryers 6
Air-conditioning assets Excavators 4 Motor mowers 5 Spot welding equipment 6
air handling units 20 Fax machines 3 Musical instruments 5 Staff training equipment 5
cooling towers 15 Fertiliser spreaders 6 Navigation systems 10 Surge bins 4
condensing sets 15 Firearms 6 Neon signs and advertising Surveyors
Aircraft (light passenger or Fire extinguishers (loose units) 5 boards 10 field equipment 5
commercial helicopters) 4 Fire detections systems 3 Office equipment instruments 10
Arc welding equipment 6 Fishing vessels 12 electronic 3 Tape recorders 5
Artefacts 25 Fitted carpets 6 mechanical 5 Telephone equipment 5
Balers 6 Food bins 4 Oxygen concentrators 3 Television and advertising films 4
Battery chargers 5 Food-conveying systems 4 Ovens and heating devices 6 Television sets, video
Bicycles 4 Forklift trucks 4 Ovens for heating food 6 machines and decoders 6
Boilers 4 Front-end loaders 4 Packaging and related equipment 4 Textbooks 3
Bulldozers 3 Furniture and fittings 6 Paintings (valuable) 25 Tractors 4
Bumping flaking 4 Gantry cranes 6 Pallets 4 Trailers 5
Carports 5 Garden irrigation equipment Passenger cars 5 Traxcavators 4
Cash registers 5 (movable) 5 Patterns, tooling and dies 3 Trollies 3
Cell phone antennae 6 Gas cutting equipment 6 Pellet mills 4 Trucks (heavy-duty) 3
Cell phone masts 10 Gas heaters and cookers 6 Perforating equipment 6 Trucks (other) 4
Cellular telephones 2 Gear boxes 4 Photocopying equipment 5 Truck-mounted cranes 4
Cheque-writing machines 6 Gear shapers 6 Photographic equipment 6 Typewriters 6
Chillers Generators (portable) 5 Planers 6 Vending machines (including
absorption type 25 Generators (standby) 15 Pleasure craft 12 video game machines) 6
centrifugal 20 Graders 4 Ploughs 6 Video cassettes 2
Cinema equipment 5 Grinding machines 6 Portable safes 25 Warehouse racking 10
Cold drink dispensers 6 Guillotines 6 Power tools (hand-operated) 5 Washing machines 5
Communication systems 5 Gymnasium equipment Power supply 5 Water distillation and
Compressors 4 cardiovascular 2 Public address systems 5 purification plant 12
Computers health testing 5 Pumps 4 Water tankers 4
mainframe/server 5 weights and strength 4 Racehorses 4 Water tanks 6
personal 3 spinning 1 Radar systems 5 Weighbridges (movable parts) 10
Computer tablet 2 other 10 Radio communication 5 Wireline rods 1
Computer software (mainframes) Hairdressers equipment 5 Refrigerated milk tankers 4 Workshop equipment 5
purchased 3 Harvesters 6 Refrigeration equipment 6 X-ray equipment 5
self-developed 5 Heat dryers 6 Refrigerators 6
Computer software Heating equipment 6 Notes
(personal computers) 2 Hot-water systems 5 1 Wear and tear may be claimed on either a diminishing value method or on a straight-
Concrete mixers portable 4 Incubators 6 line basis, in which case certain requirements apply
Concrete transit mixers 3 Ironing and pressing 2 Costs incurred in moving business assets from one location to another are not
Containers 10 equipment 6 deductible as these are regarded as being capital in nature. Wear and tear may
Crop sprayers 6 Kitchen equipment 6 be claimed over the remaining useful life of the assets
Curtains 5 Knitting machines 6 3 When an asset is acquired for no consideration, a wear and tear allowance may be
Debarking equipment 4 Laboratory research claimed on its market value at date of acquisition
Delivery vehicles 4 equipment 5 4 Prior to 1 January 2013, wear and tear on any assets acquired from a connected
Demountable partitions 6 Lathes 6 person may only be claimed on the original cost to the seller less allowances claimed
Dental and doctors equipment 5 Laundromat equipment 5 by the seller, plus recoupments and CGT included in the seller’s income
Dictaphones 3 Law reports 5 5 The acquisition of “small” items at a cost of less than R7 000 (2009 : R5 000) per item
Drilling equipment (water) 5 Lift installations 12 may be written off in full during the year of acquisition.
26 27
 Calculation of a Capital Gain/Loss
STRATEGIC ALLOWANCES • A capital gain or loss is the difference between the proceeds and the base
cost. An aggregate capital loss is carried forward and is available for set-off
against subsequent capital gains.
Asset type Conditions for annual allowance Annual allowance
Base Cost
Strategic projects An additional industrial investment allowance is 100% of cost • Expenditure included in the base cost
allowed on new and unused assets used for - acquisition, disposal, transfer, stamp duty, STT and similar costs
preferred qualifying strategic projects which were - remuneration of advisers, consultants and agents
approved between 31 July 2001 and 31 July 2005
Any other qualifying strategic projects 50% of cost - costs of moving an asset and improvement costs
• Expenditure excluded from the base cost
Pipelines New and unused structures contracted for 10% of cost (oil - expenses deductible for income tax purposes
electricity cables and construction commenced on or after pipelines)
railway tracks 23 February 2000 5% of cost (other)
- interest and raising fees, except for listed shares and business assets
- expenses initially recorded and subsequently recovered
Electronic New and unused structures contracted for 5% of cost • Methods for an asset acquired before 1 October 2001
telecommunication and construction commenced on or after - Valuation as at 1 October 2001
lines or cables 23 February 2000
As from 1 April 2015 new and used structures 6.67% of cost - 20% of the proceeds
As from 1 April 2019 new and used structures 10% of cost - Time apportionment base cost
Example: If an asset cost R220 000 on 1 October 1998 and was sold on
Airport and New and unused assets brought into use on or 5% of cost
port assets before 28 February 2022 and used directly and
30 September 2023 for R450 000, as CGT was implemented on
solely for purpose of business as airport, 1 October 2001, the base cost is:
terminal or transport operation or port authority Original cost expenditure R220 000
Rolling stock Brought into use on or before 28 February 2022 20% of cost Add: R 27 600
Environmental
assets

Environmental treatment and recycling assets
as from 8 January 2008 for new and unused assets
40% in 1st year
20% in each of the
3 subsequent years


Proceeds from disposal
Less: Base cost expenditure
R450 000
(R220 000)
} x 3 25
Environmental waste disposal assets of a Time apportionment base cost R247 600
permanent nature 5% of cost
Energy efficiency All forms of energy efficiency savings as reflected Determined in Note 1: When determining the number of years to be included in the time
savings on an energy savings certificate in any year of accordance with a apportionment calculation, a part of the year is treated as a full year.
assessment ending before 1 January 2026 formula Note 2: Where expenditure in respect of a pre-valuation date asset was incurred
Solar PV Generation capacity exceeding 1 megawatt 50% / 30% / 20% on or after 1 October 2001 and an allowance has been allowed in respect of that
renewable energy For tax years on or after 1 January 2016, generation asset, an extended formula is applied.
capacity not exceeding 1 megawatt 100% of cost Note 3: Expenditure incurred on or after 1 October 2001 is then added to the
Generation capacity without limitation brought into base cost determined in accordance with one of the above methods.
use for the first time between 1 March 2023 and
28 February 2025 125% of cost • Part disposals
- Base cost is apportioned unless it is separately identifiable
Proceeds
CAPITAL GAINS TAX • The total amount received or accrued from the disposal
As from 1 October 2001, Capital Gains Tax (CGT) applies to a resident’s worldwide • Excluded
assets and to a non-resident’s immovable property or assets of a permanent estab- - amounts included in gross income for income tax purposes
lishment situated in South Africa. - amounts repayable or a reduction in the sale price in the year of disposal
Disposals • Specific transactions
CGT is triggered on disposal of an asset. - connected persons - deemed to be at market value
- deceased persons - market value as at date of death
• Important disposals include - deceased estates - the bequest is deemed to be at the base cost
- abandonment, exchange, scrapping, loss or donation
- vesting of an interest in an asset of a trust in the beneficiary i.e. market value at date of death.
- distribution of an asset by a company to a shareholder Inclusion Rates and Effective Rates
- granting, renewal, extension or exercise of an option Inclusion rate Maximum effective rate
• Deemed disposals include
- termination of South African tax residency 2023 2024 2025 2023 2024 2025
- a change in the use of an asset Individuals 40,0% 40,0% 40,0% 18,0% 18,0% 18,0%
- an asset ceasing to be part of a permanent establishment
• Disposals exclude Special Trusts 40,0% 40,0% 40,0% 18,0% 18,0% 18,0%
- the transfer of an asset as security for a debt or the release of Companies 80,0% 80,0% 80,0% 22,4% 21,6% 21,6%
such security Trusts 80,0% 80,0% 80,0% 36,0% 36,0% 36,0%
- issue of, or grant of an option to acquire a share, debenture or
unit trust In the case of Collective Investment Schemes (unit trusts), the unitholder is liable
- loans and the transfer or release of an asset securing debt. for the CGT on disposal of the units. Retirement Funds are exempt from CGT.
28 29
Exclusions and Rebates
• Annual exclusion DIVIDEND STRIPPING
Natural persons and special trusts R40 000 (2016 : R30 000) Where a company, holding at least 50% of the shares (directly or together
Natural persons in the year of death R300 000 (2012 : R200 000) with a connected person) in an unlisted company, pays an extraordinary
The annual exclusion is applied to the net capital gain or loss prior to the exempt dividend to a resident shareholder within 18 months of the disposal
application of the inclusion rate. of the shares, the capital gain will be adjusted to include a portion of the
• Other exclusions extraordinary dividend as proceeds from the sale of the shares.
- A primary residence, owned by a natural person or a special trust, As from 1 January 2019, certain disposals resulting from corporate
used for domestic residential purposes, where the proceeds do not restructure transactions are excluded.
exceed R2 million. Where the proceeds exceed R2 million, the
exclusion is R2 million (2012 : R1,5 million) of the calculated capital gain As from 20 February 2019, where an extraordinary dividend accrues to a
- Personal use assets owned by a natural person or a special trust holding company from a target company, and that target company, within a
- Lump sums from insurance and retirement benefits, except for certain period of 18 months, issues shares to another person (company, individual
second-hand policies or trust) that share issue will result in a deemed disposal by the holding
- Small business assets or an interest in a small business, limited to company due to a decrease in the effective interest of the holding company in
R1,8 million (2012 : R900 000) if certain requirements are met, including: the target company. The deemed disposal will result in a capital gain for the
- the market value of all the person’s business assets at the date of holding company as a portion of the extraordinary dividend will be regarded
disposal is less than R10 million (2012 : R5 million) as proceeds from the sales of the shares.
- the natural person was a sole proprietor, partner or held a minimum An extraordinary dividend is any dividend that exceeds 15% of the higher of
shareholding of 10%, and was actively involved in the business for at market value of the shares disposed 18 months prior to their disposal or at
least five years the date of their disposal.
- the natural person is at least 55 years old, or suffers from ill-health, A dividend received or accrued after 30 October 2019 in terms of an
is infirm or deceased unbundling or liquidation transaction undertaken as a corporate restructure
- Compensation, prizes and donations to certain PBO’s transaction is not regarded as an extraordinary dividend.
- Assets used by registered micro-businesses for business purposes.
Rollover Relief INVOLUNTARY DISPOSALS
The capital gain is disregarded until ultimate disposal of the asset or in the case
of a replacement asset it is spread over the same period as wear and tear may Where movable or immovable assets are disposed of by operation of law,
be claimed for the replacement asset, commencing when the replacement asset theft or destruction, taxpayers can defer the taxable recoupments and capital
is brought into use unless disposed of earlier. gains if the proceeds are equal to or exceed the base cost and are fully
The relief applies to the following: reinvested in qualifying replacement assets. These assets must be contracted
• certain involuntary disposals for within 12 months and brought into use within three years. These periods
• replacement of qualifying business assets (excluding buildings) may be extended for up to six months. Tax on the recoupment and capital
• transfer of assets between spouses gain upon the disposal of the old asset is spread over the same period as
• shareblock conversions to sectional title or full title wear and tear may be claimed on the replacement asset. Personal use
• certain corporate restructure transactions. assets do not qualify for this relief.
Valuations as at 1 October 2001
Valuations should have been obtained before 30 September 2004. For certain REINVESTMENT RELIEF
assets these valuations should have been lodged with the first tax return
submitted after 30 September 2004, or such other time as SARS may allow, Taxpayers can defer taxable recoupments and capital gains on the sale
provided the valuation was in fact done prior to the requisite date: of business assets (excluding buildings) if they fully reinvest the proceeds
• where the market value of any intangible asset exceeded R1 million from the sale in other qualifying replacement assets. These assets must
• where the market value of any other asset exceeded R10 million be contracted for within 12 months and brought into use within three years.
Non-Resident Sellers of Immovable Property These periods may be extended for up to six months. Tax on the recoupment
Where a non-resident disposes of immovable property in South Africa in and capital gain upon the disposal of the old asset is spread over the same
excess of R2 million, the purchaser is obliged to withhold the following taxes period as wear and tear may be claimed for the replacement asset.
from the proceeds (unless a directive to the contrary has been issued):
Seller’s status Withholding tax
UNQUANTIFIED PROCEEDS
1/9/2007-21/2/2017 As from 22/2/2017 Where an asset is disposed of for an unquantified amount, the portion of the
Natural person 5,0% 7,5% amount which cannot be quantified in that year is deemed to accrue in the
Company 7,5% 10,0% year that it becomes quantifiable. Any recoupment, capital gain or capital
Trust 10,0% 15,0% loss arising from such transaction is deferred until such time as the amount
The tax withheld is regarded as a pre-payment of the tax due as a result of the becomes quantifiable.
capital gain made by the non-resident upon the submission of a tax return for Where an asset is brought into use in the first year, but the amount can only
that year of assessment. If a return is not submitted within 12 months of the be quantified in a subsequent year, the wear and tear will be claimed in the
end of the year of assessment, the pre-payment is regarded as a final tax. subsequent year.
30 31
DEEMED CAPITAL DISPOSAL OF SHARES PRE-TRADING EXPENDITURE
As from 1 October 2007, the proceeds on the sale of an equity share or Expenditure and losses incurred in connection with, but prior to the
collective investment scheme unit will automatically be of a capital nature if commencement of trade, is allowed as a deduction, provided the expenditure
held continuously for at least three years except in the case of: and losses, including section 24J interest, would have been deductible had
• a share in a non-resident company, subject to certain exclusions the trade commenced. Such expenditure and losses are ring-fenced and
• a share in a shareblock company can only be set-off against income from that trade. The balance is carried
forward and can be claimed in a subsequent year of assessment.
• a hybrid equity instrument.
Previously the taxpayer could elect that the proceeds on the sale of a listed
share held for at least five years be treated as capital. PRE-PAID EXPENDITURE
Expenditure paid should be apportioned to the extent that only expenditure
LEARNERSHIP ALLOWANCES actually incurred in a year of assessment is deductible. The remainder of the
pre-paid expenditure will be deductible in subsequent years of assessment.
Employers may claim learnership allowances in respect of registered This does not apply if one of the following requirements are met:
learnerships, over and above the normal remuneration deduction. • the goods, services or benefits are supplied or rendered within six months
This allowance is granted in two parts which consists of a recurring annual after the end of the year of assessment
allowance and a completion allowance. An annual pro-rata allowance is • the total pre-paid expenditure does not exceed R100 000 (2012 : R80 000)
granted depending on the number of months falling within the relevant tax • expenditure with specifically determined timing and accrual
year. The completion allowance is determined by multiplying the number of • pre-paid expenditure payable in terms of a legislative obligation.
completed 12 month periods of the learnership to the amounts below.
For learnerships entered into on or after 1 October 2016, the allowances are: DOUBTFUL DEBT ALLOWANCE
• NQF levels 1 to 6: R40 000 (disabled person: R60 000) For years of assessment commencing 1 January 2019, the allowance is:
• NQF levels 7 to 10: R20 000 (disabled person: R50 000)
For Taxpayers Applying IFRS 9
The level descriptions are:
• 40% of the IFRS 9 loss allowance relating to impairment that is measured
• NQF levels 1 to 4: Up to grade 12 (National Certificate) at an amount equal to the lifetime expected credit loss
• NQF level 5: Higher Certificate
• 40% of amounts of bad debts that have been written off for accounting
• NQF level 6: Diploma or Advanced Certificate purposes but do not meet the requirements for a tax deduction
• NQF levels 7 to 10: Bachelor’s Degree to Doctorate.
• 25% of the difference between the IFRS 9 loss allowances relating to
Prior to 1 October 2016, the allowances were R30 000 (disabled person: impairment and the IFRS 9 loss allowance in respect of which 40% tax
R50 000) regardless of the person’s NQF level. allowance is determined to be allowed as a deduction.
The allowances cease to apply from 1 April 2027. For Taxpayers Not Applying IFRS 9
After taking into account the value of any security:
SPECIAL ECONOMIC ZONES • 40% of the face value of debts that are at least 120 days past due date
• 25% of the face value of debts that are between 60 days and 120 days
As from 9 February 2016, certain companies trading in a special economic past due date.
zone will qualify for:
An annual ruling can be obtained from SARS, based on specific criteria,
• a lower company tax rate of 15% which will increase the 40% to 50% for debts exceeding 150 days in arrear,
• an enhanced new and unused building allowance at a rate of 10% increasing by an additional 5% for every 30 days, but limited to 85% when the
• an enhanced employment incentive for all employees, without an age debt is in arrear for 12 months or longer.
restriction, earning below R60 000 per annum.
In order to qualify the company must be formed and effectively managed in Prior to 1 January 2019, an allowance of 25% of the doubtful debt provision
South Africa and generate at least 90% of its income within the zone. was permitted.
This incentive ceases to apply to any year of assessment commencing the
later of 1 January 2031 or ten years after the commencement of trading in the VENTURE CAPITAL INVESTMENTS
special economic zone.
An investment in a venture capital company was deductible as follows:
PRE-PRODUCTION INTEREST From 1 January 2012 to 20 July 2019
Natural Person/Trust
100%
Company
100%
From 21 July 2019 to 30 June 2021 R2,5 million R5 million
Prior to 1 January 2012, interest and related finance charges incurred on any
borrowing for the acquisition, installation or construction of any machinery, Approved venture capital companies and the qualifying entities in which they
plant, building or improvements to a building or other assets, including land, were permitted to invest were subject to certain requirements.
were deductible when the asset was brought into use in the production of The investment must be held for more than five years to avoid a recoupment.
income. Such expenses are now deductible as pre-trading expenditure. Investments made after 30 June 2021 do not qualify for the deduction.
32 33
 Controlled Foreign Companies
RESIDENCE BASED TAXATION A CFC is a non-resident company in which residents, other than a
headquarter company, directly or indirectly own or control more than 50% of
As from 1 January 2001, residents are taxed on their worldwide income. the participation or voting rights or is consolidated in terms of IFRS 10.
Resident means • A resident must include in his income:
• A natural person who is ordinarily resident in South Africa Resident’s participation rights in the CFC
• As from 1 March 2005, a natural person is deemed resident if physically Net income of CFC x
present in South Africa for at least 92 days in the current and each of the Total participation rights in the CFC
preceding five tax years, and at least 916 days during the five preceding • The net income of a CFC should be calculated according to South
tax years. These days do not need to be consecutive African tax principles. If the calculation results in a loss, the deductions
• A company or trust that is incorporated, established, formed or which are limited to income and the excess is carried forward.
has its place of effective management in South Africa. Exemptions
Resident excludes • The net income, including capital gains, of the CFC that is derived from
an active bona fide foreign business establishment situated outside
• A natural person, who was previously regarded as a deemed resident, if South Africa, subject to certain exclusions
physically absent from South Africa for a continuous period of at least • Income of the CFC otherwise taxed in South Africa at normal rates
330 days from the date of departure
• Foreign dividends received by the CFC from another CFC to the extent
• A person who is deemed to be exclusively a resident of another country that the income from which the dividend is declared has already been
for the purposes of the application of any double taxation agreement. included in the resident’s taxable income under the CFC rules
Exemptions • Net income attributable to interest, royalties or similar income payable
• As from 1 March 2020, foreign employment income not exceeding to the CFC by other foreign companies forming part of the same group
R1,25 million (previously no limit) is exempt, provided the person spends • The high tax exemption applies where the aggregate of foreign taxes
more than 183 days, of which at least 60 days are continuous, outside payable by the CFC, for years of assessment commencing on or after
South Africa in any 12 month period commencing or ending during that 1 January 2020, is at least 67.5% (previously 75%) of the amount of
tax year South African tax that would have been imposed had the CFC been a
• Foreign pension and social security payments, subject to conditions. South African taxpayer.
Ceasing of Tax Residency Relief from Foreign Taxes
A natural person ceases tax residency due to a change in ordinary residence, • Where a resident has to include in his taxable income any foreign
deemed residence or due to the application of the tie-breaker rules of a sourced income or capital gain, the proportionate amount of the net
double taxation agreement. This results in a deemed disposal of most income of a CFC, foreign dividends, or other attributable amounts, a
worldwide assets which may give rise to Capital Gains Tax, and requires rebate in respect of any foreign taxes paid or payable in respect of such
various disclosures. amount to a foreign government is allowed
Foreign Dividends • The rebate is limited to the foreign tax payable and may not exceed:
Foreign dividends received from a non-resident company and dividends Taxable foreign income
Total South African normal tax x
received from a headquarter company are taxable, except if: Total taxable income
• the shareholder holds at least 10% of the equity and voting rights of the • If the foreign tax paid exceeds the limit set out above, the excess may be
distributing company, subject to certain exceptions carried forward for a maximum of seven years, but is not refundable
• the dividend is paid to a person by a foreign company listed on the • For years of assessment commencing on or after 1 January 2012 to
JSE and to the extent that it does not consist of a dividends in specie 31 December 2015, foreign taxes withheld on income arising from
• the dividend is paid to a resident company by a foreign company listed services rendered in South Africa could have been claimed as a rebate.
on the JSE and consists of a dividends in specie • Tax withheld in a foreign country in respect of South African sourced
• the distributing company is a controlled foreign company (CFC) and income is recognised as a deduction against such income, not as a
the dividends do not exceed amounts deemed to be the resident rebate against South African tax payable on that income.
shareholder’s income under the CFC rules General
• foreign dividends declared by one company to another company resident • A loss incurred in carrying on a business outside South Africa may not be
in the same country. set-off against income in South Africa
For years of assessment commencing on or after 1 March 2017, a partial • A foreign capital loss may be set off against a local capital gain
exemption applies to other taxable foreign dividends which are subject to • The amount of foreign tax payable must be converted to rands at the
a formula whereby the maximum rate of taxation is 20% (previously 15%) last day of the tax year by applying the average exchange rate
subject to a reduction in terms of a double taxation agreement. • Foreign income is converted to rands by applying the spot exchange
A resident is entitled to a credit calculated in accordance with a formula, for rate at the date the income accrues. Natural persons and non-trading
any withholding tax paid in respect of a foreign dividend that is included in trusts may elect to apply the average exchange rate for that tax year
gross income, provided such dividend is not fully exempt. • Where foreign income may not be remitted because of restrictions
As from 1 April 2012, no deduction is allowed for expenditure, including imposed by the source country, such income is included in the resident’s
interest, incurred in the production of foreign dividends. gross income in the tax year during which that income may be remitted.
34 35
DOUBLE TAXATION AGREEMENTS WITHHOLDING TAX ON ROYALTIES
Double taxation arises where two countries have a taxing right on the same As from 1 January 2015, a final withholding tax of 15% (previously 12%) is
amount. South Africa negotiated double taxation agreements with various imposed on royalties paid to a non-resident from a South African source,
countries around the world. subject to a reduction in the rate in terms of a double taxation agreement.
The purpose of these agreements is to eliminate double taxation. The double Royalties are exempt from the withholding tax if:
taxation agreements are available on www.sars.gov.za • the non-resident natural person was physically present in South Africa
for a period exceeding 183 days in aggregate during the 12 month
TAXATION OF NON-RESIDENTS period preceding the date on which the royalty is paid
• the non-resident natural person, company or trust carried on business
Interest through a permanent establishment situated in South Africa during the
Interest received by or accrued to a non-resident is exempt from normal tax, 12 month period preceding the date on which the royalty is paid
unless the individual was physically present in South Africa for a period of
more than 183 days in aggregate or carried on business through a permanent • the royalty is paid by a headquarter company and the intellectual
establishment in South Africa at any time during the prior 12 month period. property is sub-licenced to one or more of the foreign companies in
As from 1 March 2015, where this exemption is applicable, a final withholding which the headquarter company holds at least 10% of the equity and
tax of 15% is imposed on interest paid to a non-resident, subject to a voting rights.
reduction in the rate in terms of a double taxation agreement. The person paying the royalty has a withholding obligation, unless in
Dividends possession of a written declaration and undertaking confirming that the
As from 22 February 2017, Dividends Tax is payable at a rate of 20% recipient is either entitled to an exemption or to double taxation relief and
(previously 15%), subject to a reduction in the rate in terms of a double that the recipient will inform the person of any change in circumstances.
taxation agreement. Prior to 1 April 2012, dividends were subject to
Secondary Tax on Companies.
Royalties DEDUCTION ROYALTY TO NON-RESIDENTS
As from 1 January 2015, a final withholding tax of 15% (previously 12%) is
imposed on royalties paid to a non-resident, subject to a reduction in the rate in As from 1 January 2009, no deduction is allowed in respect of royalty
terms of a double taxation agreement. payments to non-residents if:
Residents require Government and SARB approval for royalty payments to • the intellectual property was at any time wholly or partly owned by the
a non-resident. taxpayer or another South African resident, or
Service Fees • the intellectual property was developed by the taxpayer or a connected
There is no withholding tax on cross-border consultancy, management and person who is a resident.
technical fees from a South African source. If the royalty is subject to a withholding tax at a rate of 10% then a deduction
Other Income of one-third of the royalty is allowed.
Non-residents are only taxed on income from a South African source. If the royalty is subject to a withholding tax at a rate of 15% then a deduction
Payment to Non-Resident Sportspersons and Entertainers of half of the royalty is allowed.
A withholding tax of 15% is imposed on non-resident sportspersons and
entertainers on income earned in South Africa.
HEADQUARTER COMPANY
WITHHOLDING TAX ON INTEREST The headquarter company rules apply for years of assessment commencing
As from 1 March 2015, a final withholding tax of 15% is imposed on interest on or after 1 January 2011 and provide for several benefits, including:
paid to a non-resident from a South African source, subject to a reduction in the • its subsidiaries are not treated as controlled foreign companies
rate in terms of a double taxation agreement, on the date it is paid or becomes • dividends are not subject to Dividends Tax
due and payable, except interest: • no application of thin capitalisation or transfer pricing rules in the case of
• payable by any sphere of the South African Government back-to-back cross-border loans
• arising on any listed debt instrument • exemption from the withholding tax on interest in respect of back-to-back
• arising on any debt owed by a bank, the DBSA, the IDC or the SARB loans.
• payable by a headquarter company where transfer pricing does not apply
• accruing to a non-resident natural person who was physically present in As from 1 January 2011, a special regional investment fund rule is applicable.
South Africa for a period exceeding 183 days in aggregate, during that Qualifying foreign investors will be regarded as passive investors with no
year, or carried on a business through a permanent establishment situated exposure to South African tax when using a South African portfolio manager.
in South Africa at any time during the prior 12 month period A company may elect to be treated as a headquarter company on an annual
• payable by a local stockbroker to a non-resident. basis. This election results in the company ceasing to be South African tax
The person paying the interest has a withholding obligation, unless in resident but liable for exit taxes such as Capital Gains Tax, Dividends Tax
possession of a written declaration and undertaking confirming that the and normal income tax.
recipient is either entitled to an exemption or to double taxation relief and that
the recipient will inform the person of any change in circumstances.

36 37
 WITHHOLDING TAXES SUMMARY Royalties % Dividends % Interest %

DOUBLE TAXATION AGREEMENTS Netherlands 0 5/10 0

Double taxation agreements provide for relief in respect of royalties, dividends and New Zealand 10 5/15 10
interest withholding taxes. Nigeria 7,5 7,5/10 7,5
Norway 0 5/15 0
Royalties % Dividends % Interest % Oman 8 5/10 0
Pakistan 10 10/15 10
Peoples Republic of China 7/10 5 10
Non-Treaty Countries 15 20 15 Poland 10 5/15 10
Treaty Countries Portugal 10 10/15 10
Algeria 10 10/15 10 Qatar 5 0/5/10 10
Australia 5 5/15 10 Romania 15 15 15
Austria 0 5/15 0 Russian Federation 0 10/15 10
Belarus 5/10 5/15 5/10 Rwanda 10 10/20 10
Belgium 0 5/15 10 Saudi Arabia 10 5/10 5
Botswana 10 10/15 10 Seychelles 0 5/10 0
Brazil 10/15 10/15 15 Sierra Leone 15 15 15
Bulgaria 5/10 5/15 5 Singapore 5 5/10 7,5
Cameroon 10 10/15 10 Slovak Republic 10 5/15 0
Canada 6/10 5/15 10 Spain 5 5/15 5
Chile 5/10 5/15 5/15 Sweden 0 5/15 0
Croatia 5 5/10 0 Switzerland 0 5/15 5
Cyprus 0 5/10 0 Taiwan 10 5/15 10
Czech Republic 10 5/15 0 Tanzania 10 10/20 10
Democratic Republic of Congo 10 5/15 10 Thailand 15 10/15 10/15
Denmark 0 5/15 0 Tunisia 10 10 5/12
Egypt 15 15 12 Turkey 10 10/15 10
Eswatini 10 10/15 10 Uganda 10 10/15 10
Ethiopia 15 10 8 Ukraine 10 5/15 10
Finland 0 5/15 0 United Arab Emirates 10 5/10 10
France 0 5/15 0 United Kingdom 0 5/10/15 0
Germany 0 7,5/15 10 United States of America 0 5/15 0
Ghana 10 5/15 5/10 Zambia 0/15 20 0/15
Greece 5/7 5/15 8 Zimbabwe 10 5/10 5
Hong Kong 5 5/10 10 A number of double taxation agreements provide for alternative rates,
Hungary 0 5/15 0 including zero, to be applied in specific circumstances.
India 10 10 10 The double taxation agreements are available on www.sars.gov.za
Indonesia 10 10/15 10
Iran 10 10 5
Ireland 0 5/10 0 MULTILATERAL INSTRUMENT
Israel 0/15 20 15
Italy 6 5/15 10 On 30 September 2022 South Africa deposited its multilateral instrument for
Japan 10 5/15 10 ratification with the OECD. This effectively modifies the bilateral tax treaties
Kenya 10 10 10 already concluded. More than 100 countries are using the multilateral
Korea 10 5/15 10 instrument to efficiently amend their tax treaty networks. The multilateral
Kuwait 10 0 0
instrument forms part of Action 15 of the OECD’s base erosion and profit
Lesotho 10 10/15 10
Luxembourg 0 5/15 0 shifting initiative to combat treaty abuse.
Malawi 0/15 20 15 The multilateral instrument does not replace the bilateral tax treaty but will be
Malaysia 5 5/10 10 applied in conjunction with the relevant treaty to modify the treaty application
Malta 10 5/10 10 where all of the following requirements are met:
Mauritius 5 5/10 10
Mexico 10 5/10 10
• where both countries have elected for the same amendment to apply
Mozambique 5 8/15 8 • both countries have deposited their multilateral instrument for ratification
Namibia 10 5/15 10 • a period of three calendar months has expired from the date of ratification.
South Africa’s multilateral instrument came into force on 1 January 2023.
38 39
 COMMON REPORTING STANDARD TRANSFER PRICING
The common reporting standard is a process which allows for financial For years of assessment commencing on or after 1 October 2016, entities which
information to be obtained and automatically exchanged with other tax enter into cross-border transactions with connected persons, and the value of
jurisdictions on an annual basis. The financial institutions required to report the transactions exceed or are reasonably expected to exceed R100 million, are
include banks, brokers, asset managers, private equity funds and long-term required to maintain transfer pricing policy documentation.
insurers. Transfer pricing policy documentation, as required by SARS, includes:
The information in respect of reportable accounts include the person’s • a description of the ownership structure of the entities
particulars such as name, address, tax reference number, place of birth • detailed particulars of each connected person with whom potentially affected
and account number, as well as financial information such as account transactions have been entered into
balances and income from interest, dividends, certain insurance products • a summary of the entity’s business operation including the nature of its
and proceeds from the sale of financial assets. business, specific business and external market conditions, and it’s business
Reportable accounts include accounts held by individuals, entities (including strategy
trusts, partnerships and foundations) and passive entities. • details of senior management, including an organogram indicating the
titles and location of persons
Jurisdictions that have agreed to exchange information • major economic and legal issues affecting the profitability of the entity and/or
Albania, Andorra, Anguilla, Antigua and Barbuda, Argentina, Aruba, Australia, Austria, the industry in which the entity operates
Azerbaijan, Bahamas, Bahrain, Barbados, Belgium, Belize, Bermuda, Brazil, British • a description of any business restructuring or transfer of intangibles
Virgin Islands, Brunei Darussalam, Bulgaria, Canada, Cayman Islands, Chile, China, • the entity’s market share within the industry and analysis of market competitor
Colombia, Cook Islands, Costa Rica, Croatia, Curacao, Cyprus, Czech Republic, information
Denmark, Dominica, Ecuador, Estonia, Faroe Islands, Finland, France, Germany, • key value drivers
Ghana, Gibraltar, Greece, Greenland, Grenada, Guernsey, Hong Kong, Hungary, • industry policy, incentives or restrictions
Iceland, India, Indonesia , Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, • the role of the entity and the connected persons in the supply chain.
Kazakhstan, Kenya, Korea, Kuwait, Latvia, Lebanon, Liechtenstein, Lithuania,
Luxembourg, Macao SAR, Malaysia, Maldives, Malta, Marshall Islands, Mauritius, Where the value of a specific transaction exceeds R5 million, detailed records of the
Mexico, Moldova, Monaco, Montserrat, Nauru, Netherlands, New Zealand, Nigeria, transaction must be maintained, including:
Niue, Norway, Oman, Pakistan, Panama, Peru, Poland, Portugal, Qatar, Romania, • the nature and terms of the transaction
Russia, Samoa, San Marino, Saudi Arabia, Seychelles, Singapore, Sint Maarten, • copies of the relevant contracts or agreements
Slovak Republic, Slovenia, South Africa, Spain, St. Kitts and Nevis, St. Lucia, St. • relevant SARB applications or approvals
Vincent and the Grenadines, Sweden, Switzerland, Turkey, Turks and Caicos Islands, • functional and comparable analysis
United Arab Emirates, Ukraine, United Kingdom, Uruguay and Vanuatu. • operational flows such as information, product and cash flow
• comprehensive details of financial assistance.
COUNTRY-BY-COUNTRY REPORTING Where a connected person retains these documents in the ordinary course of
business, the entity will be deemed to comply with the requirement to retain such
For years of assessment commencing on or after 1 January 2016, the documentation.
ultimate parent company of a multinational enterprise (MNE) group that is a Where the volume of transactions are high, SARS may agree to alternative records
tax resident in South Africa is required to file a country-by-country report to that the entity must retain in order to satisfy the arm’s length requirement.
SARS within 12 months of the year-end. The threshold for reporting to SARS The documents have to be submitted with the annual tax return.
is a consolidated MNE group turnover of at least R10 billion in the fiscal year As from 22 December 2023, taxpayers can submit an application for an Advanced
prior to the year in which the report must be submitted. The first report should Pricing Agreement, to obtain certainty that their transactions are at arm’s length.
have been filed from 28 February 2018.
Where the ultimate parent company is not tax resident in South Africa, the
South African tax resident company which forms part of the MNE group must
disclose the identity and tax residency of the reporting entity in the tax return.
SECURITIES TRANSFER TAX
Upon receipt of the report the revenue authority in that tax jurisdiction will As from 1 July 2008, Securities Transfer Tax (STT) is payable at a rate of 0,25%
then automatically exchange such information. on the greater of the consideration, closing price or market value on the transfer,
cancellation or redemption of any listed or unlisted share, member’s interest in a
The report will contain extensive information in respect of transactions close corporation or cession of a right to receive distributions from a company or
between the group entities and includes: close corporation.
• revenue • On listed securities, the STT is payable by the 14th day of the month
• profit/loss before income tax following the month during which the transfer occurred
• income tax paid or accrued • On unlisted securities, the STT is payable by the end of the second month
• stated capital and accumulated earnings following the month during which the transfer occurred
• number of employees • If not paid in full within the prescribed period, interest is imposed at the
• tangible assets, other than cash or cash equivalents. prescribed rate and a 10% penalty is charged
The information obtained in the report will be utilised by SARS to assess • No STT is payable if the consideration, closing price or market value is
high-level transfer pricing risks. The report is due within 12 months of the less than R40 000
last day of the reporting fiscal year of the MNE group. • No STT is levied on the issue of shares.
40 41
 TRANSFER DUTY BOND/INSTALMENT SALE REPAYMENTS
On Immovable Property (on or after 1 March 2023) The following table reflects repayments on every R1 000 borrowed.
Payable by natural persons and legal entities: Example: A bond of R1 000 000 at 11,5% over a 20 year period
R1 000 000 ÷ R1 000 x 10,66 = R10 660,00 a month over the 20 year period.
Property value Rates of tax
Mortgage Bonds Short Term Financing
R 0 - R 1 100 000 Nil Rate 10 Yrs 20 Yrs 25 Yrs 30 Yrs 36 Months 48 Months 60 Months
R 1 100 001 - R 1 512 500 3% on the value above R 1 100 000 07,0% 11,61 07,75 07,07 06,65 30,88 23,95 19,08
R 1 512 501 - R 2 117 500 R 12 375 + 6% on the value above R 1 512 500 07,5% 11,87 08,06 07,39 06,99 31,11 24,18 20,04
08,0% 12,13 08,36 07,72 07,34 31,34 24,41 20,28
R 2 117 501 - R 2 722 500 R 48 675 + 8% on the value above R 2 117 500 08,5% 12,40 08,68 08,05 07,69 31,57 24,65 20,52
R 2 722 501 - R12 100 000 R 97 075 + 11% on the value above R 2 722 500 09,0% 12,67 09,00 08,39 08,05 31,80 24,89 20,76
09,5% 12,94 09,32 08,74 08,41 32,03 25,12 21,00
R12 100 001 + R1 128 600 + 13% on the value above R 12 100 000 10,0% 13,22 09,65 09,09 08,78 32,27 25,36 21,25
10,5% 13,49 09,98 09,44 09,15 32,50 25,60 21,49
• No Transfer Duty is payable if the transaction is subject to VAT 11,0% 13,78 10,32 09,80 09,52 32,74 25,85 21,74
11,5% 14,06 10,66 10,16 09,90 32,98 26,09 21,99
• If a registered vendor purchases property from a non-vendor, the notional 12,0% 14,35 11,01 10,53 10.29 33,21 26,33 22,24
input tax credit is limited to the VAT fraction (15/115) (prior to 1 April 2018: 12,5% 14,64 11,36 10,90 10,67 33,45 26,58 22,50
14/114) applied to the lower of the selling price or the open market value. 13,0% 14,93 11,72 11,28 11,06 33,69 26,83 22,75
As from 10 January 2012, the notional input tax credit is no longer limited 13,5% 15,23 12,07 11,66 11,45 33,94 27,08 23,01
to the Transfer Duty paid 14,0% 15,53 12,44 12,04 11,85 34,18 27,33 23,27
14,5% 15,83 12,80 12,42 12,25 34,42 27,58 23,53
• A notional input tax credit is only claimable to the extent the purchase price 15,0% 16,13 13,17 12,81 12,64 34,67 27,83 23,79
has been paid and the property transferred 15,5% 16,44 13,54 13,20 13,05 34,91 28,08 24,05
• Exemptions apply to certain corporate restructure transactions 16,0% 16,75 13,91 13,59 13,45 35,16 28,34 24,32
16,5% 17,60 14,29 13,98 13,85 35,40 28,60 24,58
• The acquisition of a contingent right in a trust that holds a residential
property or the shares in a company or the member’s interest in a close
corporation, which owns residential property comprising more than 50%
of its CGT assets, is subject to Transfer Duty at the applicable rate PENALTIES AND INTEREST
• Liabilities of the entity are to be disregarded when calculating the fair
value of the contingent right in the trust, the shares in the company or Type Reason Basis of charge
the member’s interest in the close corporation
Provisional 1st and 2nd 10% penalty plus interest charged daily from
• Residential property includes dwellings, holiday homes, apartments and tax payment late due date to date of payment
similar abodes, improved and unimproved, zoned for residential purposes.
It excludes a structure of five or more units, rented by five or more Provisional 3rd payment Interest charged daily from effective date to
unconnected persons. It excludes immovable property forming part tax late earlier of payment date or assessment date.
of the enterprise of a VAT vendor. Effective date is six months after year-end,
except in the case of February year-ends,
where the effective date is 30 September
PRIME OVERDRAFT RATES Provisional Overpayment Interest credited daily from effective date to
tax date of refund
Rate Rate
Assessment Late payment Interest charged on each completed month
Date of change % Date of change % from first due date to date of payment
31 July 2012 8,50 15 April 2020 7,75
31 January 2014 9,00 22 May 2020 7,25 Value-Added Tax Late payment 10% penalty plus interest charged daily from
31 July 2014 9,25 24 July 2020 7,00 (VAT) due date to date of payment
24 July 2015 9,50 19 November 2021 7,25 Value-Added Tax Refund Interest credited monthly from 21 business
20 November 2015 9,75 28 January 2022 7,50 (VAT) days after receipt of return to date of payment.
29 January 2016 10,25 24 March 2022 7,75 Period is suspended when vendor fails to
18 March 2016 10,50 19 May 2022 8,25 provide information or update banking details
21 July 2017 10,25 21 July 2022 9,00
29 March 2018 10,00 22 September 2022 9,75 Employees Late payment 10% penalty plus interest charged daily from
23 November 2018 10,25 24 November 2022 10,50 tax (PAYE) due date to date of payment
19 July 2019 10,00 27 January 2023 10,75
16 January 2020 9,75 31 March 2023 11,25 Skills Development Late payment 10% penalty plus interest charged daily from
20 March 2020 8,75 26 May 2023 11,75 Levy (SDL) due date to date of payment
Unemployment Late payment 10% penalty plus interest charged daily from
The above dates are applicable to Standard Bank. Banks do not always adjust their Insurance Fund (UIF) due date to date of payment
rates on the same day.
42 43
 INTEREST RATES CHANGES TAXATION OF FARMING INCOME
Prescribed rate - Late payment of assessed tax, provisional tax, VAT and Farming income is subject to the provisions of the First Schedule to the
underpayment of provisional tax; refund of VAT after prescribed period, refund Income Tax Act.
on successful objection, appeal or conceded appeal
Date of change Rate % Summary of the First Schedule’s Main Paragraphs
1 November 2020 7,00
1 March 2022 7,25 2–5&9 Valuation of livestock and produce 14 – 16 Plantation farming
1 May 2022 7,50 6–7 Election of standard values 17 Sugar cane destroyed by
1 July 2022 7,75 8 Ring-fencing of livestock acquisitions fire
1 September 2022 8,25 11 Donations and in specie dividends 19 Rating formula for farmers
1 November 2022 9,00 12 Capital development expenditure (who are natural persons)
1 January 2023 9,75 13 Forced sales and drought relief 20 Expropriation of farming
1 March 2023 10,50 provisions land
1 May 2023 10,75
1 July 2023 11,25 Rating Formula Applicable to Farmers
1 September 2023 11,75 Because a farmer’s income fluctuates from year to year, a farmer who is a
All payments are first set-off against penalties, then interest and finally tax. natural person may elect to be taxed in accordance with a rating formula. The
Prescribed rate - Refund of overpayment of provisional tax formula is based on the average taxable farming income in the current and
Date of change Rate % preceding four years. Should the farmer elect to make use of the formula, it
1 November 2020 3,00 is binding in future years and the farmer is not permitted to make use of the
1 March 2022 3,25 provisions relating to government livestock reduction schemes, rating formula
1 May 2022 3,50 for plantation farmers and provisions relating to sugar cane farmers.
1 July 2022 3,75
1 September 2022 4,25 For a farmer commencing farming operations the average taxable income
1 November 2022 5,00 from farming in the first year of assessment ending on or after 1 January 2008
1 January 2023 5,75 will be two-thirds of the taxable income for that period.
1 March 2023 6,50
1 May 2023 6,75 Capital Development Expenditure
1 July 2023 7,25 The following items of capital expenditure, incurred during a year of
1 September 2023 7,75 assessment, are deductible against farming income:
Interest on overpayment of provisional tax is only payable if taxable income
exceeds R50 000 (individuals and trusts), R20 000 (companies and close • expenditure which is not restricted to taxable income from farming:
corporations) or the refund exceeds R10 000, regardless of taxable income. - eradication of noxious weeds and invasive alien vegetation and
prevention of soil erosion
Official rate - Fringe benefits, loans to shareholders, loans to trusts and to • expenditure which is restricted to taxable income from farming:
companies held by trusts
Date of change Rate % - dipping tanks, building of roads and bridges for farming operations
1 May 2020 5,25 - dams, irrigation schemes, boreholes, pumping plants and fences
1 June 2020 4,75 - additions, erection of, extensions and improvements to farm buildings
1 August 2020 4,50 not used for domestic purposes
1 December 2021 4,75 - costs of establishing the area for the planting of trees, shrubs and
1 February 2022 5,00 perennial plants
1 April 2022 5,25 - carrying of electric power from main power lines to farm machinery
1 June 2022 5,75 and equipment.
1 August 2022 6,50
1 October 2022 7,25 The excess expenditure over taxable income from farming is carried forward
1 December 2022 8,00 to the next year of assessment.
1 Febuary 2023 8,25 Machinery, implements, utensils and articles for farming purposes are written
1 April 2023 8,75 off over three years on a 50/30/20 basis. This does not apply to motor
1 June 2023 9,25 vehicles used to convey passengers, caravans, aircraft (excluding crop-
As from 1 March 2011, the official rate is equal to the South African repurchase rate spraying aircraft) or office furniture and equipment. Normal wear and tear may
plus 100 basis points.
be claimed on these items.
SKILLS DEVELOPMENT LEVY Non-Farming Income
As from 1 April 2001, the Skills Development Levy is payable by employers at a rate Income from non-farming sources should be shown separately.
of 1% (previously 0,5%) of remuneration. The most common examples of non-farming income include:
As from 1 August 2005, employers paying annual remuneration of less than • income derived from carrying on a trade other than farming
R500 000 are exempt from this levy. • rental income from farmland
Directors remuneration, on the same basis as for PAYE, will be subject to the Skills • interest received
Development Levy. • annuities.
44 45
 Inheritances
EXCHANGE CONTROL REGULATIONS Non-residents are entitled to transfer their inheritance from resident estates
abroad, subject to certain documentary requirements. Former South African
Foreign Capital Allowance residents must have completed emigration formalities to qualify.
Tax compliant individuals, 18 years and older, can invest up to a limit of Residents are not required to declare inheritances from bona fide foreign
R10 million (prior to 1 April 2015 : R4 million) per calendar year abroad, estates that accrued after 17 March 1998 and may retain the capital and
subject to obtaining a tax compliance status (TCS) PIN. income generated from such assets abroad.
Income accruing thereon may also be retained abroad. Foreign assets inherited by a resident from the estate of a South African
Applications in excess of R10 million are considered on a case by case basis. resident and can be retained abroad provided the original owner of such
Single Discretionary Allowance assets has complied with the regulations and will not be placed at the
Individuals 18 years and older are permitted to transfer up to a limit of disposal of other South African residents.
R1 million (2010 : R750 000) per calendar year (without the requirement to Payments by Credit or Debit Cards
obtain a tax clearance certificate) which can be used to cover donations to Residents can make permissible foreign exchange payments for small
missionaries, maintenance, gifts (except gold and jewellery), loans, travel, transactions up to a limit of R50 000 per transaction using their credit or debit
study, alimony and child support, wedding expenses and foreign investment. card, subject to the single discretionary allowance limit.
Proof of these transactions should be retained.
Applications in excess of R1 million are considered on a case by case basis. Foreign Bank Accounts
Individuals, younger than 18 years, are limited to a travel allowance of Individuals may utilise a foreign bank account for travel expenses, foreign
R200 000 (2010 : R160 000) per calendar year. investment, legitimate foreign earned income and foreign inheritances.
Foreign currency for travel purposes may only be obtained within 60 days Foreign Investments in South Africa
prior to departure. Non-residents may freely invest in South Africa provided that such
Unused foreign currency must be resold within 30 days to an authorised transactions are concluded at arm’s length. The proceeds on disposal of such
dealer except where the next business trip is within 90 days. assets to a non-resident must be repatriated to South Africa.
Directors Fees The transfer of proceeds on disposal to a resident requires prior approval
Subject to certain conditions and documentation, no limit is applicable to from SARB. Interest and dividends are freely remittable. Loans by
directors fees paid to non-residents. non-residents to South African residents are subject to specific criteria.
Guarantees by Residents for Foreign Liabilities Outbound Investments by Companies
Individuals may raise loans abroad to finance the acquisition of foreign Certain commercial banks may approve investments up to R5 billion
assets without recourse to South Africa. Under no circumstances may local (Prior to 23 February 2022 : R1 billion) per calendar year. Approval from
guarantees or suretyships be issued or South African assets be encumbered. SARB is required for foreign direct investments exceeding this limit.
Ceasing of Tax Residency Dividends declared by the offshore subsidiary may be retained abroad.
As from 1 March 2021, the concept of exchange control emigration is no Net proceeds on the sale of a foreign investment must be repatriated.
longer applicable and has been aligned to the ceasing of tax residency. Restrictions on Local Financial Assistance
An emigrant is permitted a foreign capital allowance from assets disclosed Local financial assistance subject to the 1:1 ratio is available to non-residents
as at the date of ceasing of residency of R10 million (2015: R4 million) per if the borrowing is required for the acquisition of residential property in South
calendar year subject to obtaining a TCS PIN. Africa.
Household and personal effects may be exported within an overall insured Forward Cover
value of R1 million (prior to 18 January 2022: R2 million) per family unit in the South African companies may cover forward up to 75% of budgeted import
same calendar year that the individual ceases to be a resident. commitments or export accruals in respect of the following financial year,
Income or capital distributions from an inter vivos trusts may be transferred subject to certain conditions.
abroad and will be deducted from the foreign capital allowance.
Loop Structures
Remittable Income to Emigrants As from 1 January 2021, the restriction of loop structures was lifted and
Certain forms of income earned by an emigrant on his remaining South replaced with the requirement to report the loop investment to an authorised
African assets are freely remittable abroad, after providing for tax. dealer together with an independent auditor’s written confirmation that the
Krugerrands and Cash transaction was concluded at arm’s length.
In addition to the single discretionary allowance residents may: For loop transactions between connected parties where more that 40% of
• export Krugerrands up to an amount of R30 000 as gifts to the equity is in a non-resident company held by SA residents, the authorised
non-residents subject to the completion of the prescribed SARS form. dealer will refer the transaction to the SARB for approval.
• take up to R25 000 per person in South African currency for visits outside Existing unauthorised loop structures (created prior to 1 January 2021 or
the common monetary area. where the 40% threshold was exceeded) must be regularised with SARB.
Residents Temporarily Abroad
Remuneration earned whilst physically working abroad can be retained Withdrawal of Lump Sums from Retirement Funds
offshore. Residents temporarily abroad may use the single discretionary and As from 1 March 2021, lump sum withdrawals can be made prior to
foreign capital allowances without returning to South Africa. Income from retirement age where an individual remains non-resident for an uninterrupted
pension and retirement annuity funds may be transferred abroad. period of three years. Prior to such date, pre-retirement lump sum
withdrawals were only permitted upon exchange control emigration.
46 47
VALUE-ADDED TAX ( VAT ) VAT CLAW-BACK FOR DEVELOPERS
The system provides for three types of supplies: Where a property developer is unable to sell residential property and temporarily
leases the property, a change of use adjustment must be made to account for the
• Standard-rated supplies – supplies of goods or services, at a rate of: output tax. The deemed output is based on the open market value of the property
1/04/2018 7/04/1993 30/09/1991 when it is leased for the first time. A temporary concession was granted for the
15% 14% 10% period 10 January 2012 to 31 December 2017 for the units temporarily leased for
• Exempt supplies – supplies of certain goods or services not subject to a maximum period of 36 months per unit.
VAT. Persons making only exempt supplies are not entitled to input credits Where a change of use adjustment was made between 10 September 2020 and
• Zero-rated supplies – supplies of certain goods or services subject to 31 March 2022, the subsequent sale of the property is subject to Transfer Duty.
VAT at zero per cent. Vendors making zero-rated supplies are entitled to As from 1 April 2022, the change of use adjustment is based on the adjusted cost
input credits. Zero-rated supplies include certain basic food items, export (cost of construction, extension or improvement) of the property provided it is
sales and services (subject to specific requirements) and the supply of temporarily leased for a period not exceeding 12 months. Where the lease period
a going concern. Supplies from South Africa to a customs controlled area exceeds 12 months at the outset the change in use adjustment will be based on
or a special economic zone will be treated as exports. the open market value.
Where a vendor makes mixed supplies of standard or zero-rated supplies Where the property is sold or brought back into the “VAT net” by the end of the
together with exempt supplies the input credits are apportioned. Input credits on 12 month period, output tax is payable on the sale consideration or open market
direct and indirect expenses relating to exempt supplies cannot be claimed. value respectively, with an input tax deduction allowed for the deemed output tax
Notional input tax can be claimed as a “change in use” adjustment, on capital previously paid in terms of the change of use adjustment.
assets owned as at the date of registration as a vendor.
A tax invoice exceeding R5 000 (2013 : R3 000) must be dated, have an VAT RELIEF INTER-GROUP
individual serialised number and reflect both the seller’s and purchaser’s trade
As from 10 January 2012, group debt older than 12 months is not subject to the
name, postal or physical address, VAT registration number, description and VAT charge back provision and the group creditor is not entitled to claim a VAT
quantity of goods, VAT amount and display the words “tax invoice”, “VAT invoice” input deduction for a bad debt written off.
or “invoice”.
Input credits may be claimed within five years of the date of the tax invoice.
Input credits may in general not be claimed in respect of motor vehicles ASSESSED LOSSES RING-FENCED
(including double-cabs) and entertainment. Individuals
All fee-based financial services are subject to VAT with the exception of: As from 1 March 2004, losses from secondary or “suspect” trades are ring-fenced
• premiums payable in respect of life policies and contributions to pension, and are not available for set-off against income from any other trade.
provident, retirement annuity and medical aid funds It will only apply to an individual whose taxable income, before setting off any
• buying or selling of derivatives or granting of options. assessed loss or balance of assessed loss, is equal to or exceeds the level at
which the maximum rate of tax is applicable.
Registration Requirements For the restrictions to apply the person must have incurred an assessed loss
A vendor is required to register for VAT if taxable supplies (including the supply from the secondary trade in at least three years of assessment during any five
of electronic services) in any 12 month period exceeds or is likely to exceed year period, or have carried on one of the following “suspect” trades:
R1 million. Registration is not required where this threshold is exceeded as a • Sporting activities
result of abnormal circumstances of a temporary nature. • Dealing in collectables
Where turnover is less than R1 million in a 12 month period, but exceeds • The rental of accommodation, vehicles, aircraft or boats, unless at least
R50 000, a vendor can register voluntarily. 80% of the asset is used by persons who are not relatives of such person
In the case of commercial rental establishments, the voluntary registration for at least half of the year of assessment
• Animal showing
threshold is R120 000 (prior to 1 April 2016 : R60 000). • Farming or animal breeding, otherwise than on a full-time basis
For years of assessment commencing on or after 1 March 2012, a registered • Performing or creative arts
micro-business can register voluntarily. • Gambling or betting
Where turnover is less than R30 million in a 12 month period, VAT returns are • Acquisition or disposal of cryptocurrency.
rendered every two months. Where turnover exceeds R30 million in a The taxpayer will be able to circumvent these provisions if it can proved that
12 month period a monthly VAT return is required. there is a reasonable prospect of deriving taxable income within a reasonable
Farmers, with a turnover of less than R1,5 million in a 12 month period, render period and where the taxpayer complies with other tests, unless losses have been
VAT returns every six months. incurred in at least six out of ten years.
Normally a vendor accounts for VAT on an invoice basis. Where turnover in a Companies
12 month period is likely to be less than R2,5 million, the vendor can apply to For years of assessment ending on or after 31 March 2023, companies are limited
be placed on a payment basis if the vendor is a natural person or an to utilise their assessed loss to the greater of R1 million or 80% of their taxable
unincorporated body of persons whose members are natural persons. income.

48 49
RECREATIONAL CLUBS REPORTABLE ARRANGEMENTS
A recreational club is a non-profit organisation which provides social and The participant in or the promoter of a reportable arrangement is obliged to
recreational amenities or facilities for its members. report the arrangement to SARS within 45 business days of the date on which
The annual trading income exemption is the greater of 5% of total membership such arrangement was entered into. If the arrangement is not reported an
fees and subscriptions or R120 000 (2010 : R100 000). administrative penalty is imposed.
Income in excess of this exemption is subject to tax at the corporate rate. These arrangements include:
An approved recreational club is exempt from provisional tax. • financing transactions whereby the calculation of interest, finance costs
Recreational clubs are subject to CGT with certain rollover relief applying. or similar fees are wholly or partly dependent on the tax treatment of that
arrangement and provision has been made for the variation of such
BODY CORPORATES finance fees, by potentially more than R5 million.
• any arrangement which would have qualified as a hybrid equity
Levies accrued to sectional title body corporates or share block companies are instrument (except in the case of listed instruments) if the prescribed
exempt from income tax. In addition to this exemption all other receipts and period of three years was replaced with 10 years.
accruals are exempt up to a maximum of R50 000 per annum. • a share buy-back transaction on or after 3 February 2016 with one or
Income in excess of this exemption is subject to tax at the corporate rate. more shareholders for an aggregate amount exceeding R10 million
These entities are exempt from provisional tax. and the company issued or is required to issue shares within 12 months
of entering into the share buy-back
PUBLIC BENEFIT ORGANISATIONS • payments made by a resident, on or after 16 March 2015, to a foreign
trust where that person has or acquires a beneficial interest in that trust
An approved public benefit organisation (PBO) carries out certain public and the total contributions made before and after that date, or the value
benefit activities in a non-profit manner substantially in South Africa. of interest exceeds R10 million, subject to certain exceptions
The annual trading income exemption is the greater of 5% of total receipts and
accruals or R200 000 (2010 : R150 000). Income in excess of this exemption • the acquisition of a direct or indirect controlling interest in a company
is subject to tax at the corporate rate. A PBO is exempt from provisional tax. A on or after 3 February 2016, which has or is reasonably expected to have
PBO is exempt from CGT except for assets used in a trading activity. An audit an assessed loss exceeding R50 million
certificate is required confirming the donations received were used solely for • an arrangement between a resident and a foreign insurer where the
the approved public benefit activities. aggregate amount payable to the resident on or after 16 March 2016
exceeds R5 million and is determined mainly by reference to the value of
DEDUCTIONS DONATIONS particular assets or categories of assets that are held by or on behalf of
the foreign insurer or by another person
Donations to certain approved PBO’s qualify for a tax deduction: • the rendering of consultancy, construction, technical and managerial
Companies and Trusts - limited to 10% (2007 : 5%) of taxable income before services to a resident or a permanent establishment in South Africa in
the deduction of donations. terms of which a non-resident was or is anticipated to be physically
Individuals - limited to 10% (2007 : 5%) of taxable income, excluding present in South Africa for the purposes of rendering such services
retirement lump sum payments and severance benefits, and before the and the expenditure in respect of those services incurred or to be
deduction of donations. incurred on or after 3 February 2016, exceeds R10 million and does
As from 1 March 2014, donations in excess of the 10% threshold may be not qualify as remuneration.
carried forward to the next tax year. In certain circumstances there is no reporting requirement where the
Employees may request PAYE reductions where regular donations are made aggregate tax benefit does not exceed R5 million or where the tax
by way of salary deductions not exceeding 5% of net remuneration. benefit which is derived is not the main or one of the main benefits of the
Donations to the Solidarity Fund from 1 April 2020 to 30 September 2020 arrangement.
qualified for an additional 10% deduction.
TAX CLEARANCE
THIRD-PARTY REPORTING A taxpayer’s tax clearance can be confirmed by obtaining a tax compliance
For periods commencing on or after 1 March 2018, mandatory third-party status PIN, provided that the taxpayer does not have any tax debt
reporting to SARS applies to various institutions, including banks, medical outstanding (except if the debt has been suspended pending an objection or
schemes, and trust accounts managed by attorneys or estate agents. appeal or is subject to an approved instalment payment plan or is less than
Bi-annual submission periods are as follows: R100) or returns outstanding (except if arrangements are in place to submit
• 1 March to 31 August by 31 October of each year those returns).
• 1 March to end of February by 31 May of each year. SARS may revoke a taxpayer’s compliance status if the tax clearance was
As from 1 March 2023, PBO’s for section 18A certificates and resident trusts issued in error or obtained on the basis of fraud or misrepresentation. SARS
for distributions must make their first submission as follows: must give a taxpayer at least ten business days notice before revoking the
• 1 March 2023 to 29 February 2024 - PBO’s on 31 May 2024 compliance status.
• 1 March 2023 to 29 February 2024 - resident trusts by 30 September 2024 The compliance status changes when the taxpayer becomes non-compliant.
As from 2 November 2019, printed certificates previously issued are invalid.
50 51
VOLUNTARY DISCLOSURE ADMINISTRATIVE PENALTIES
As from 1 October 2012, a permanent Voluntary Disclosure Programme (VDP) Failure to submit certain returns or disclose information will give rise to the
is available to assist taxpayers to regularise their tax affairs. following fixed amount penalties:
The relief applies to penalties (excluding penalties for late submission), Assessed loss or taxable income Penalty
understatement penalties and criminal prosecution, but does not include for preceding year
foreign exchange contraventions and interest on late payments. Assessed loss R 250
R 0 – R 250 000 R 250
UNDERSTATEMENT PENALTIES R 250 001 – R 500 000 R 500
R 500 001 – R 1 000 000 R 1 000
Assessments issued on or after 19 January 2017 R 1 000 001 – R 5 000 000 R 2 000
Behaviour Standard Obstructive Voluntary Voluntary R 5 000 001 – R10 000 000 R 4 000
case or repeat disclosure disclosure R10 000 001 – R50 000 000 R 8 000
case after audit before audit Above R50 000 000 R 16 000
notification notification
• The penalty will automatically be imposed monthly until the taxpayer
Substantial 10% 20% 5% 0% remedies the non-compliance
understatement
• The penalty is payable if the taxpayer is:
Reasonable care 25% 50% 15% 0% - a natural person who has one or more (prior to 1 December 2021 at
not taken in least two) year’s tax returns outstanding
completing return
- a company which has returns outstanding from the 2009 tax year and
No reasonable 50% 75% 25% 0% failed to submit the returns within 21 days of a specific final demand
grounds for tax • Late submission of the PAYE reconciliation attracts a penalty of 10% of
position
the PAYE deducted for the tax year
Impermissible 75% 100% 35% 0% • The failure to disclose a reportable arrangement will result in a monthly
avoidance penalty, limited to 12 months, of R50 000 for a participant and R100 000
arrangements for a promoter, which may be increased, depending on the tax benefit
Gross negligence 100% 125% 50% 5% • Non-compliance that will attract administrative penalties, once an effective
date has been gazetted, include the failure to:
Intentional tax 150% 200% 75% 10%
evasion
- meet registration requirements such as failing to register or not
registering timeously or not supplying supporting documents
Where the taxpayer can prove that the understatement results from a bona - inform SARS of a change of address, banking details or the details of
fide inadvertent error, no understatement penalty will be imposed. the representative taxpayer
In the case of a substantial understatement (tax shortfall exceeds R1 million) - submit a return timeously or failure to sign the return
SARS may waive the penalty if the taxpayer is in possession of an opinion
provided by an independent registered tax practitioner before the return was - retain records for the prescribed period and in the prescribed format
due and the practitioner had been given all the material facts and concluded - provide information requested or co-operate during a field audit.
that the taxpayer was more than likely correct in the tax treatment.
HOME OFFICE DEDUCTION
DISPUTE RESOLUTION The requirements for the deduction of home office costs are onerous and
Where there is uncertainty as to the basis of an assessment, a request for must be based on the ratio of the actual floor area of the office to the actual
reasons can be submitted within 30 business days from the date of the floor area of the home.
issue of the assessment. Where there is a dispute with the basis of the The deduction of a allowable expenditure will only be allowed where the
assessment, an objection must be submitted within 80 business days (prior to
10 March 2023: 30 business days) from the date of assessment or from the home office is regularly and solely used for the purpose of the taxpayer’s
date when a response to the request for reasons is received. trade and has been specifically equipped for such purpose.
Where an objection is disallowed the appeal must be submitted within 30 Where the taxpayer derives income mainly from commission, the duties must
business days from the date the objection is disallowed. The prescribed form be mainly performed outside the employer’s office.
and supporting documents must accompany an objection or appeal. If an Where the taxpayer is an employee, the duties must be performed at the
objection or appeal is submitted late, adequate grounds must be provided to home office for more than 50% of the time.
condone the lateness. Where there is a tax debt in dispute, a suspension of The claiming of the deduction will impact the primary residence exemption for
payment should be requested at all stages of the dispute process. Capital Gains Tax on the disposal of the property.
52 53
TRUST DISTRIBUTIONS LOCAL TRUST DONATIONS TAX
Distributions from trusts are taxed in terms of the conduit principle where Donations Tax is payable at a rate of 20% on the value of any property
the nature of income is retained and taxed in the hands of the beneficiaries, disposed of gratuitously by a resident (natural person, corporate entity or
subject to certain deeming provisions. trust). As from 1 March 2018, where a donation or the cumulative donations
Deeming provisions exceed R30 million, the excess is taxed at a rate of 25%. Donations made
• Where the income or capital gain of the trust is attributable to any prior to 1 March 2018 and exempt donations are excluded in the determination
donation, settlement or other similar disposition (including the sale of an of the R30 million threshold. The tax is payable by the end of the month
asset to a trust by way of an interest free loan) the income or a portion following the month in which the donation takes effect.
thereof may be deemed to accrue to the donor, rather than the Exemptions from Donations Tax include:
beneficiaries or the trust, subject to certain conditions • Donations by natural persons up to R100 000 (2006 : R50 000) per year
• A capital gain distributed to an exempt person, such as a public benefit • Donations by corporate entities not considered to be public companies
organisation or a non-resident beneficiary, is taxed in the trust. up to R10 000 per year
Trust losses • Donations between spouses
A loss incurred by a trust cannot be distributed to beneficiaries. The loss is • Bona fide maintenance payments
carried forward as an assessed loss in the trust to the next tax year. • Donations to PBO’s and qualifying traditional councils and communities
Distributions from a South African trust to a non-resident beneficiary • Donations where the donee will not benefit until the death of the donor
As from 1 March 2024, income distributed to a non-resident beneficiary is • Donations made by companies which are recognised as public
taxed in the trust. Prior to this the beneficiary was taxed. companies for tax purposes
As from 1 March 2019, a capital gain distributed to a non-resident • Donations cancelled within six months of the effective date
beneficiary is taxed in the trust. Prior to this the beneficiary was taxed. Where • Property disposed of under and in pursuance of any trust
the income is attributable to a donation by a resident donor, it is deemed to • Donations between companies forming part of the same group
accrue to the donor and is taxed in the donor’s hands. • Donation of property or a right in property situated outside South Africa
if acquired by the donor:
Trust to trust distribution of a capital gain - before becoming resident in South Africa for the first time
A capital gain distributed from one trust to another trust retains its nature - by inheritance or donation from a non-resident.
and is taxed in the second trust. This distributed capital gain cannot then be
further distributed to beneficiaries of the second trust unless the second trust
had a vested interest in the asset of the first trust prior to the disposal. ESTATE DUTY
Rates of Estate Duty
TRUST DISTRIBUTIONS FOREIGN TRUST • Persons deceased:
Income distributions retain their nature and are taxed accordingly in the - prior to 1 October 2001: 25%
hands of the South African resident beneficiary. - on or after 1 October 2001: 20%
Capital distributions are taxed in the hands of the South African resident ben- - on or after 1 March 2018: 20% - first R30 million
eficiary where all of the following are applicable: : 25% - excess above R30 million.
• that person was a beneficiary of the trust in the year in which the income Exemptions from Estate Duty include:
was earned • Persons deceased prior to 1 March 2006, the first R1,5 million
• the amount had not already been taxed in South Africa • Persons deceased on or after 1 March 2006, the first R2,5 million
• the amount would have constituted income of the trust if it had been a • Persons deceased on or after 1 March 2007, the first R3,5 million
South African resident trust. • Any bequest to a surviving spouse or a PBO
Prior to 1 March 2019, where the capital distribution was in respect of • As from 1 January 2010, the unutilised portion of the exemption of
accumulated foreign dividends and the trust held more than 10% of the equity the first deceased spouse may be carried forward to the estate of the
shares and/or voting rights in the foreign company, the full distribution is surviving spouse.
exempt from tax in the hands of the resident beneficiary.
This is also applicable to capital distributions of accumulated foreign capital
gains on the sale of shares in that foreign company.
EXECUTOR’S REMUNERATION
As from 1 March 2019, where the capital distribution was in respect of Subject to ratification by the Master, an executor is entitled to either of the
accumulated foreign dividends and the trust held more than 50% of the equity following remuneration:
shares and/or voting rights in the foreign company, the exemption is limited • the remuneration stipulated in the will
and the dividend is taxed at an effective rate of 20%. • 3,5% on the value of gross assets and 6% on income accrued and
This is also applicable to capital distributions of accumulated foreign capital collected from date of death.
gains on the sale of shares in that foreign company which is taxable at the Executor’s remuneration is subject to VAT if the executor is registered
effective capital gains tax rate applicable to that beneficiary. as a vendor.
54 55
 Lump Sum Codes
IRP5 CODES 3901 Gratuities and Severance Benefits - retirement or retrenchment
3906 Special Remuneration (e.g. proto-teams)
Normal Income Codes 3907 Other Lump Sums (e.g. backdated salaries extended over
3601 Income previous tax year, non-approved funds)
3602 Income - non-taxable 3908 Surplus Apportionments and Exempt Policy Proceeds on or after
3603 Pension 1 January 2006
3605 Annual Payment 3909 Unclaimed Benefits paid by fund
3606 Commission 3915 Pension, Provident or Retirement Annuity Fund Lump Sum
3607 Overtime Benefits paid on or after 1 October 2007
3608 Arbitration Award 3920 Lump Sum Withdrawal Benefits from Retirement Funds after
3610 Annuity from a Retirement Annuity Fund 28 February 2009
3611 Purchased Annuity 3921 Living Annuity and Section 15C Surplus Apportionments accruing
3613 Restraint of Trade after 28 February 2009
3614 Other Retirement Lump Sums 3922 Compensation in respect of death during employment
3616 Independent Contractors 3923 Transfer of unclaimed benefits
3618 Annuity from a provident or a provident preservation fund 3924 Transfer on retirement
3619 Labour Brokers (IT) - with exemption certificate Deduction Codes
3620 Resident non-executive directors fees
3621 Non-resident non-executive directors fees 4001 Pension Fund Contributions paid and deemed paid by employee
3622 Qualifying Long Service Cash Award (excluding PAYE) 4003 Provident Fund Contributions paid and deemed paid by employee
4005 Medical Aid Contributions paid and deemed paid by employee
Allowance Codes 4006 Total Retirement Annuity Fund Contributions paid and deemed
3701 Travel Allowance paid by employee
3702 Reimbursive Travel Allowance (IT) 4024 Medical Services Costs Deemed paid for immediate family
3703 Reimbursive Travel Allowance - non-taxable 4030 Donations paid by the employer to a PBO
3704 Subsistence Allowance - local travel (IT) 4472 Employer’s Pension Fund Contributions
3707 Share Options Exercised (Section 8A) 4473 Employer’s Provident Fund Contributions
3708 Public Office Allowance 4474 Employer’s Medical Aid Contributions
3713 Other Allowances 4475 Employer’s Retirement Annuity Fund Contributions
3714 Other Allowance - non-taxable 4493 Employer’s Medical Aid Contributions i.r.o. retired employees
3715 Subsistence Allowance - Foreign Travel (IT) 4497 Total Deductions
3717 Broad-Based Employee Share Plan (Section 8B) 4582 Remuneration inclusion used in section 11F deduction
3718 Employee Equity Instruments (Section 8C) 4583 Remuneration for foreign services inclusion used for section 11F
3722 Reimbursive Travel Allowance (PAYE) 4584 Employer’s Bargaining Council Contributions
Fringe Benefit Codes 4585 Employer’s Pension Fund Contributions - Retired Employee
4586 Employer’s Provident Fund Contributions - Retired Employee
3801 General Fringe Benefits 4587 Exempt foreign employment income taken into account by the employer
3802 Right of Use of Motor Vehicle for PAYE purposes
3805 Free or Cheap Accommodation
3806 Free or Cheap Services Employees Tax Deduction and Reason Codes
3808 Payment of Employees Debt 4102
PAYE
3809 Taxable Bursaries - Non disabled person - Basic Education 4115
Tax on Retirement Lump Sum and Severance Benefits
3810 Company Contribution to Medical Aid 4116
Medical Scheme Fees Tax Credit
3813 Cost related to Medical Services paid by Company 4118
The sum of the Employment Tax Incentive
3815 Non-Taxable Bursaries - Non disabled person - Basic Education 4120
Additional Medical Expense Tax Credit - 65 years and older
3816 Right of Use of Motor Vehicle acquired by operating lease 4141
UIF Employee and Employer Contribution
3817 Pension Fund Contributions paid by employer for the employee 4142
SDL Contribution
3820 Taxable Bursaries - Non disabled person - Further Education 4149
Total PAYE, SDL and UIF
3821 Non-taxable Bursaries - Non disabled person - Further Education 4150
01 - Invalid from March 2002
3822 Non-taxable Fringe Benefits on acquisition of immovable property 02 - Earn Less than the Tax Threshold
3825 Provident Fund Contributions paid by employer for the employee 03 - Independent Contractor
3828 Retirement Annuity Contributions paid by employer 04 - Non-Taxable Earnings (including nil directive and income
3829 Bursaries and Scholarships protection policy from 1 March 2015)
3830 Non-Taxable Bursaries Disabled person - Basic Education 05 - Exempt Foreign Employment Income
3831 Taxable Bursaries Disabled person - Further Education 06 - Directors Remuneration - income determined in the
3832 Non-Taxable Bursaries Disabled person - Further Education following tax year
3833 Taxable benefits-Bargaining Council employer contribution 07 - Labour Broker with IRP30
3834 Non-taxable loan to purchase immovable property 08 - No Tax Due to Medical Aid Tax Credit allowed
Foreign Employment Income 09 - No Withholding of tax on shares possible
For employees with foreign employment income the value of 50 must be added to
each relevant IRP5 code.
Example: Code 3601 will become 3651 for Foreign Income.
56 57
 RETENTION OF DOCUMENTS/RECORDS
RECOMMENDED GUIDELINES
Retention periods commence from the date of the last entry in the particular record

Retention
Companies period
Memorandum and Articles of Association/Incorporation Indefinite
Certificate of Incorporation/Registration Certificate Indefinite
Certificate of Change of Name Indefinite
Certificate to Commence Business Indefinite
Share/Securities Register, Minute Book, CM25 and CM26 Indefinite
Rules Indefinite
Change your
Change
viewyour
aboutview
Annual Financial Statements 7 years
Books of Account and supporting schedules 7 years
Ancillary books of account 7 years
Record of past and present directors
Fixed Asset Registers
Proxy Forms
7 years
7 years
3 years
about offshore
offshore
Close Corporations
Founding Statement (CK1) Indefinite
investing
investing
Amended Founding Statement (CK2) Indefinite
Minute Book Indefinite
Annual Financial Statements 15 years
Books of Account 15 years
Accounting records including supporting schedules 15 years If you’re an investor who saw offshore
Fixed Asset Registers 15 years
When a company or close corporation reproduces its records on
as off limits, there’s never been a better
microfilm, the original may be destroyed after a period of three years time to change your view.
The microfilm copies must be retained indefinitely
Other Suggested Periods of Retention The Glacier Offshore Investment Plan is an
(Where relevant statutory or legal requirements have been taken into account)
investment solution which offers you the
Records of trust monies Indefinite
Tax returns and assessments (after date of submission) 5 years
opportunity to invest offshore, accessing different
Staff personnel records (after employment ceased) 3 years markets and currencies with simplicity, flexibility
Salary and wage registers 5 years and affordable investment minimums.
Paid cheques and bills of exchange 6 years
Invoices – sales and purchases 5 years Visit www.glacierinsights.co.za for more information or speak
Bank statements and vouchers 5 years
to your adviser about our solutions.
Stock sheets 5 years
Documentary proof of zero rated supplies 5 years
Year-end working papers 5 years
VAT records 5 years
Other vouchers and general correspondence 5 years The Glacier Offshore Investment Plan is administered by Glacier Financial Solutions
(Pty) Ltd, a licensed administrative financial services provider, FSP 770.
The above list is not comprehensive
Navigate model portfolios are managed by Glacier Financial Solutions (Pty) Ltd., a
58 licensed discretionary financial services provider, FSP 770, trading as Glacier Invest.
 NOTES NOTES

Published and printed on behalf of Glacier by Sanlam, Published and printed on behalf of Glacier by Sanlam,
by New Media, a division of Media24 (PTY) Ltd. by New Media, a division of Media24 (PTY) Ltd.
www.moneymarketing.co.za www.moneymarketing.co.za

60 61
 NOTES NOTES

Published and printed on behalf of Glacier by Sanlam, Published and printed on behalf of Glacier by Sanlam,
by New Media, a division of Media24 (PTY) Ltd. by New Media, a division of Media24 (PTY) Ltd.
www.moneymarketing.co.za www.moneymarketing.co.za

62 63
 NOTES

IF YOU KNEW
THE OUTCOME,
WOULD YOU INVEST
WITH MORE
CONFIDENCE?

Glacier is a partner you can trust to provide

specific solutions that perform the way you
need them to.

Visit www.glacierinsights.co.za for more information

or speak to your adviser about our solutions.
Published and printed on behalf of Glacier by Sanlam,
by New Media, a division of Media24 (PTY) Ltd.
www.moneymarketing.co.za
Glacier Financial Solutions (Pty) Ltd is a Licensed Financial Services Provider
64
Contact us
Tel: +27 21 917 9002/0860 452 364
Fax: +27 21 947 9210
Address: Private Bag X5 Tyger Valley 7536
Email: client.services@glacier.co.za

www.glacier.co.za

Glacier Financial Solutions (Pty) Ltd is a Licensed Financial

Services Provider.

Sanlam Life Insurance Ltd is a Licensed Life Insurer, Financial

Services, and Registered Credit Provider (NCRCP43).

Glacier Financial Solutions (Pty) Ltd is a Licensed Discretionary

Financial Services Provider, trading as Glacier Invest FSP 770.