From 30 September 1991 an invoice-based value-added tax is in force. The value-added tax system is similar to those used in Western Europe and New Zealand. Most transactions involving goods (including immovable property) and services attract value-added tax. Acquisitions of capital equipment are exempt from this tax. The rate of value-added tax is 14%. The tax is levied on the value added in each transaction.
6.10.2. Donations Tax
Donations (gift) tax is payable by the donor at 25% of the value of property disposed of after 14 March 1996 by donation by South African residents and companies (other than public companies) incorporated or managed and controlled in South Africa. There is an exemption for donations of up to R25 000 a year for an individual donor and up to R5 000 a year for a company, and for casual donations.
6.10.3. Estate Duty
Estate duty is imposed on the estates of persons dying after 14 March 1996 at a rate of 25% on the value of worldwide property if the deceased was resident in South Africa at the time of his or her death. Overseas property that the deceased acquired by inheritance or held before taking up residence in South Africa is exempt. The first R1 million of an estate is exempt. Bequests to a surviving spouse are exempt.
It has been proposed that the donations tax and estate duty be replaced by a capital transfer tax, but no decision has been made on this yet.
6.10.4. Excise and Customs Duties
South Africa imposes excise duties on the local production of certain commodities, such as automobiles, jewellery, beer and wine, without regard to their sale. Clothing, basic foods, medicine, rent, certain utilities and professional services are exempt from excise duties.
Imported goods are subject to similar treatment in the form of customs duties. The rates of such customs duties, however, are not always the same as the rates of excise duties. A rebate of customs duty can be obtained if the imported goods are to be used in manufacturing for export.
6.10.5. Local Taxes on Immovable Property
Real estate taxes are levied by local governments. Agricultural land is either wholly exempt or taxed at a lower rate than dwellings or business properties. The value of real estate on which such local taxes are levied will include land together with, in certain circumstances, improvements and buildings on the property.
6.10.6. Regional Services Council Levies
Until the 1994 elections, Regional Services Councils were responsible for the supply of basic services within their regions. Businesses paid turnover and payroll taxes to those councils. Under the new constitution those councils will be replaced by new regional governmental institutions and it is not yet known what will become of those taxes. In the interim businesses are continuing to pay them.
6.10.7. Marketable Securities Transfer Tax
A tax is currently imposed on purchases of marketable securities (including shares and debentures). From 1 April 1996 the tax is 0,5% of the consideration paid in the transaction.
6.10.8. Documentary Stamp Taxes
Stamp taxes apply to a number of documents in South Africa. The tax is on the document itself, not the transaction; thus, the tax may be imposed in the case of a written agreement even though a similar agreement made orally would not be subject to tax. Some stamp taxes are at a fixed amount and others are at ad valorem rates.
6.10.9. Duty on Transfers of Immovable Property
Transfers of immovable property where the seller is a vendor for value-added tax (VAT) purposes are subject to VAT of 14%.
Where the seller is not a vendor for VAT purposes acquisitions of immovable property by companies or close corporations are normally liable to duty at the rate of 10% of the property's value, and acquisitions by individuals are liable to duty at the rate of 1% on the first R60 000 of the value, 5% on any excess value up to R250 000, and 8% on any further value. Legislation to be introduced in 1996 will apply the 10% rate also to acquisitions of immovable property by trusts.
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
