The tax system is currently in a state of transition. In 1987, the Margo Commission of Inquiry into the tax structure of South Africa reported its findings. The general recommendations of the commission relate to a broader based fairer system of taxation with a reduction of personal income tax rates and a move towards indirect taxes, the withdrawal of special income tax allowances and specific provisions to counter tax avoidance schemes. Certain recommendations have been accepted by the government and many have been incorporated into the tax system. In 1994 a new commission was established to enquire into a wide range of tax matters. Its reports are expected to give rise to significant changes in tax legislation in the next few years. For many years married couples were taxed as a unit, with the burden falling largely on the husband. From the 1996 year of assessment, under the influence of the New Constitution's emphasis on equal treatment for all, the individual has been adopted as the basic tax paying unit, and no distinction is made between males and females or between married or single people.
Readers are advised to seek specific advice on changes in the tax system. These may depart substantially from earlier principles. The government's Reconstruction and Development Programme requires funding to be made available to achieve wide-ranging social changes, and this is likely to impact substantially on the system of taxation.
6.1 PRINCIPAL TAXES
6.1.1 Direct Taxes
Direct taxes, which are covered in more detail later in this chapter, may be summarised as follows:
Income Taxes:
- individual income tax - an annual tax on the income of partnerships and individuals (see article 'Taxation - Other Entities' and article 'Taxation - Individuals').
- company tax - an annual tax on the income of companies and close corporations (see article 'Taxation - Corporate Tax').
- secondary tax on companies - a tax imposed on dividends declared by companies and distributions made by close corporations payable and borne by the companies and close corporations (see article 'Taxation - Corporate Tax').
Capital Taxes:
- donations tax - a gift tax payable by the donor on the value of property disposed of by donation by South African residents and private companies (see article 'Taxation - Other Taxes');
- estate duty - an inheritance tax payable by the estate on the value of property of a deceased who was resident in South Africa at the date of death (see article 'Taxation - Other Taxes').
There is currently no capital gains tax in South Africa.
6.1.2. Indirect Taxes
South Africa imposes the following three indirect taxes:
- value added tax - an invoice-based value-added tax is levied on supplies of goods and services (see article 'Taxation - Other Taxes');
- excise and customs duties - for details see article 'Taxation - Other Taxes';
- stamp duties - charges levied on certain documentary instruments (see article 'Taxation - Other Taxes').
6.1.3. Administration
Company tax is payable for the fiscal year that coincides with a company's financial year.
The tax year of individuals ends on the last day of February in each year. Tax is payable in instalments by all companies and by those individuals who are classified as provisional taxpayers. Provisional tax consists of two payments, the first falling due six months after the commencement of the year of assessment and the second at the end of the year of assessment. A third ("topping up") payment must be made within seven months after the end of the year of assessment if, in the case of a company whose taxable income exceeds R20 000, or an individual whose taxable income exceeds R50 000, the total amount paid by way of provisional taxes is less than the amount of tax assessed. Interest (non-deductible) is payable on the shortfall at a prescribed rate - currently 15%. Conversely, if the total amount paid exceeds the tax assessed, interest is payable to the taxpayer at a prescribed rate - currently 12% on the amount overpaid. That interest is not taxable in the hands of non-resident taxpayers.
Employers are required to deduct employees tax from their employees' remuneration and to pay such amounts over to the authorities on a monthly basis. Employees tax thus deducted is allowed as a credit against the total amount of an employee's liability for tax as finally assessed on the basis of his or her annual return. Under the SITE system (Standard Income Tax on Employees), however, individuals earning less than R50 000 a year from employment are not required to file an annual income tax return, and the employees tax deducted from their salaries represents their full and final liability for tax. SITE tax is deducted at rates varying, currently, from 15% to 45%.
For further information please contact: Werksmans Attorneys Werksmans Chambers, 22 Girton Road, Parktown, Johannesburg 2193 or P.O. Box 927, Johannesburg 2000 South Africa Enquiries: Mr Charles Butler Telephone 27 (011) 488-0000 Telefax 27 (011) 484-3100/3200 E-Mail Address cbutler@werksmans.co.za
