Taxation In South Africa - South African Revenue Service

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2021Taxation in South Africa

Taxation in South AfricaPrefaceThis is a general guide providing an overview of the most significant tax legislationadministered in South Africa by the Commissioner for the South African Revenue Service(SARS), namely, the – Customs and Excise Act; Disaster Management Tax Relief Act; Employment Tax Incentive Act; Estate Duty Act; Income Tax Act; Securities Transfer Tax Act; Securities Transfer Tax Administration Act; Skills Development Levies Act; Tax Administration Act; Transfer Duty Act; Unemployment Insurance Contributions Act; and Value-Added Tax Act.This guide is not an “official publication” as defined in section 1 of the Tax AdministrationAct 28 of 2011 and accordingly does not create a practice generally prevailing under section 5of that Act. It should, therefore, not be used as a legal reference. It is also not a binding generalruling under section 89 of Chapter 7 of the Tax Administration Act.The information in this guide concerning income tax relates to – natural persons, deceased estates, insolvent estates or special trusts for the2021 year of assessment commencing on 1 March 2020 or ending on 28 February2021; trusts for the 2021 year of assessment commencing on 1 March 2020 or ending on28 February 2021; and companies for the 2021 year of assessment with financial years ending during the 12month period ending on 31 March 2021.Care has been taken in the preparation of this document to ensure that the information andthe rates published are correct at the date of publication. It is advisable for users to verify therates with the relevant legislation pertaining to the rates, applicable to the tax, customs orexcise concerned.Taxation in South Africa 2021i

For income tax purposes, this guide has been updated to include the Tax Administration LawsAmendment Act 24 of 2020, the Taxation Laws Amendment Act 23 of 2020 and the Rates andMonetary Amounts and Amendment of Revenue Laws Act 22 of 2020.For indirect tax purposes, all information has been updated to include amendments up to thedate of publication of this guide.All brochures, guides, interpretation notes, rulings, forms, returns and tables referred to in thisguide are available on the SARS website. Unless indicated otherwise, the latest issues ofthese documents on the website should be consulted.Should you require additional information concerning any aspect of taxation, you may – visit your nearest SARS branch, preferably after making an appointment via theSARS website; have a virtual consultation with a SARS consultant by making an appointment viathe SARS website; contact the SARS National Contact Centre– if calling locally, on 0800 00 7277; or if calling from abroad, on 27 11 602 2093 (only between 8am and 4:30pmSouth African time); visit the SARS website at www.sars.gov.za; or contact your own tax advisor or tax practitioner.Comments on this guide may be emailed to policycomments@sars.gov.za.Leveraged Legal ProductsSOUTH AFRICAN REVENUE SERVICEDate of 2003/04 issue :February 2004Date of 2004/05 issue :February 2005Date of 2005/06 issue :February 2006Date of 2006/07 issue :March 2007Date of 2007/08 issue :February 2008Date of 2008/09 issue :February 2009Date of 2009/10 issue :August 2010Date of 2010/11 issue :February 2011Date of 2012/13 issue :March 2013Date of 2013/14 issue :March 2014Date of 2014/15 issue :26 March 2015Date of 2015/16 issue :21 April 2016Date of 2016/17 issue :5 October 2017Date of 2018 issue:23 January 2019Date of 2019 issue:4 September 2019Date of 2020 issue:22 September 2020Date of 2021 issue:30 August 2021Taxation in South Africa 2021ii

ContentsPreface . iGlossary . 11.1.11.21.3Introduction . 2South African Revenue Service . 2Secrecy and confidentiality . 2Overview of taxes . 2.3.12.3.22.42.4.12.4.2Income tax . 4Introduction . 4Main source of government’s income . 4Registration as a taxpayer . 4Change of address . 5Year of assessment . 5Filing of tax returns . 5eFiling and the South African Revenue Service MobiApp . 5Payments at banks . 6Electronic funds transfer . 7Assessment . 7Calculation of taxable income . 7Calculation of normal tax liability. 8A resident . 8Natural persons . 8Ordinarily resident test . 8Physical presence test. 9Companies and other persons . 9Residents working outside South Africa. 9Tax treaties . 9Unilateral relief for foreign taxes paid or payable . 10Non-resident . 10A non-resident working temporarily in South Africa . 10Employees working at foreign diplomatic or consular missions in South Africa . 11Natural persons . 11Requirements to submit an income tax return. 11Taxation of income from employment [sections 8(1), 8A, 8B, 8C and the Fourthand Seventh Schedules] . 12Allowances [section 8(1)] . 12Taxable benefits [paragraphs 2, 7, 9 and 11 of the Seventh Schedule] . 14Marketable securities, broad-based employee share plans and equityinstruments [sections 8A, 8B, 8C and paragraph 11A of the Fourth Schedule] . 16Exempt benefit – Relocation costs [section 10(1)(nB)]. 16Income of spouses [section 7(2), (2A), (2B) and (2C)] . 17Employees’ tax (PAYE) (the Fourth Schedule) . 18Remuneration paid or payable to employees . 18Remuneration paid or payable to directors . 18Payments to personal service providers . 18Payments to labour brokers . 19Services rendered by independent contractors . 19Provisional tax (the Fourth Schedule) . 20Allowable deductions . 7Taxation in South Africa 2021iii

102.6.112.6.122.6.132.6.14General deduction formula . 21Home office expenses . 21Other deductions . 22Prohibited deductions . 24Domestic or private expenses [section 23(a) and (b)] . 24Bribes, fines or penalties [section 23(o)(i) and (ii)] . 24Premiums paid for an insurance policy for loss of income [section 23(r)] . 25Other prohibited deductions [section 23(d), (e) and (g)] . 25Pensions . 25Pensions exempt from normal tax [section 10(1)(g), (gA), (gB) and (gC)] . 25Pensions that are taxable . 26Annuities . 26Ring-fencing of assessed losses of certain trades (section 20A) . 26Rental income . 27Investment income . 27Dividends and foreign dividends . 27Interest [section 10(1)(h) and (i)]. 27Amounts received from tax-free investments (section 12T) . 28Restraint of trade [the definition of “gross income” – paragraph (cA)] . 28Business income . 28Companies and businesses. 29Tax consequences of doing business in a company . 29Provisional tax . 29Controlled foreign companies (section 9D) . 29Small business corporations (section 12E) . 29Micro businesses (sections 48 to 48C and the Sixth Schedule) . 30Insurance companies . 31Short-term insurance (section 28). 31Long-term insurance (section 29A) . 31Mining (sections 12N, 15(a), 36 and 37A). 31Oil and gas companies (the Tenth Schedule) . 32Public benefit organisations . 32Headquarter companies . 33Real estate investment trusts . 33Special allowances or deductions and recoupment . 34Industrial buildings (buildings used in the process of manufacture or a process ofa similar nature) (section 13) . 35Commercial buildings (section 13quin) . 35Buildings used by hotel keepers (section 13bis) . 36Aircraft and ships (section 12C) . 36Rolling stock (trains and carriages) (section 12DA) . 36Certain pipelines, transmission lines and railway lines (section 12D) . 37Airport assets (section 12F) . 38Port assets (section 12F) . 38Machinery, plant, implements, utensils and articles [section 11(e)] . 39Manufacturing assets (section 12C) . 39Plant or machinery of small business corporations (section 12E) . 40Machinery, plant, implements, utensils or articles or improvements made to theseassets used in farming or production of renewable energy (section 12B) . 41Invention, patent, design, trademark, copyright and knowledge [sections 11(gA),11(gB) and 11(gC)] . 42Scientific or technological research and development (sections 11D, 12 and 13) . 44Taxation in South Africa 2021iv

6.23Urban development zones (section 13quat) . 45Additional deduction for learnership agreements (section 12H) . 45Film owners (section 12O) . 47Environmental expenditure (sections 37A and 37B) . 48Certain residential units (section 13sex) . 49Residential buildings (section 13ter) . 50Deduction for sale of low-cost residential units on loan account (section 13sept) . 50Environmental conservation and maintenance expenditure (section 37C) . 51Allowance for land conservation of nature reserves or national parks(section 37D) . 512.6.24 Additional investment and training allowances for industrial policy projects(section 12I). 522.6.25 Expenditure incurred to obtain a licence [section 11(gD)] . 532.6.26 Deduction for expenditure incurred in exchange for issue of venture capitalcompany shares (section 12J) . 532.6.27 Deduction of medical lump sum payments (section 12M) . 532.7Owners or charterers of ships or aircraft who are not residents of South Africa(sections 10(1)(cG) and 33) . 532.8Farming (the First Schedule) . 542.9Deductions for expenditure and losses incurred before commencement of trade(section 11A) . 552.10 Trading stock (section 22) . 562.11 Transfer pricing and thin capitalisation (section 31) . 562.12 Capital gains tax (the Eighth Schedule) . 572.12.1 Introduction . 572.12.2 Registration . 572.12.3 Rates . 572.12.4 Capital gains and capital losses. 582.12.5 Asset . 582.12.6 Disposal . 582.12.7 Proceeds . 592.12.8 Base cost . 592.12.9 Exclusions . 602.12.10Small businesses (paragraph 57 of the Eighth Schedule) . 602.13 Withholding of amounts from payments to non-resident sellers of immovableproperty (section 35A) . 612.14 Tax rates . 612.14.1 Rate of tax to be levied on taxable income (excluding any retirement lump sumbenefit, retirement fund lump sum withdrawal benefit or severance benefit) of anynatural person, deceased estate, insolvent estate or special trust . 612.14.2 Taxable income from retirement fund lump sum withdrawal benefits: . 632.14.3 Taxable income from retirement fund lump sum benefits: . 642.14.4 Taxable income from severance benefits: . 642.14.5 Taxable income of trusts (other than special trusts or public benefitorganisations, recreational trusts or small business funding entities that aretrusts): . 642.14.6 Taxable income of companies . 65(a) Companies (other than public benefit organisations, recreational clubs or smallbusiness funding entities approved by the Commissioner, small businesscorporations, mining companies and long-term insurers) . 65(b) Small business corporations . 65(c) Registered micro businesses (turnover tax) . 65Taxation in South Africa 2021v

(d)(e)(f)(g)(h)2.14.7(b)2.152.162.17Mining companies . 66Oil and gas companies . 66Other mining companies . 66Insurance companies . 66Special economic zones . 67Taxable income of public benefit organisations, recreational clubs and smallbusiness funding entities . 67A public benefit organisation, recreational club and small business funding entitythat is a company . 68A public benefit organisation and small business funding entity that is a trust. 68Medical scheme fees tax credit (section 6A) . 68Additional medical expenses tax credit (section 6B) . 69Normal tax rebates (section 6) . 703.Taxation of foreign entertainers and sportspersons (sections 47A to 47K) . 704.Withholding tax on royalties (sections 49A to 49H) . 715.Withholding tax on interest (sections 50A to 50H) . 726.Donations tax (sections 54 to 64) . 727.Dividends tax (sections 64D to 64N) . 738.Turnover tax (sections 48 to 48C and the Sixth Schedule) . 739.Employment tax incentive . 7410.General anti-avoidance rule (sections 80A to 80L) . 3Value-added tax . 76Introduction . 76Rates . 77Registration, collection and payment of value-added tax . 77Application of value-added tax to supplies and imports . 79Zero-rated supplies. 79Exempt supplies . 81Tourists, diplomats and exports to foreign countries . 81Tourists . 81Diplomats . 83Exports to foreign countries . 12.712.7.1Customs . 83Introduction . 83Trade agreements . 85Duties . 86Customs duty . 86Excise duties and levies . 86Value-added tax on imported goods . 87Customs value. 87Clearance declarations . 88Rebates allowed on importation of goods . 88Persons entering South Africa . 89Goods imported without the payment of customs duty and which are exemptfrom value-added tax . 92(a) Goods imported by persons who are not residents of South Africa . 92(b) Goods imported by persons who are residents of South Africa . 92(c) Limits on certain goods. 92Taxation in South Africa 2021vi

(d)(e)12.812.912.1012.1112.1212.1312.14Children under 18 years of age . 93Crew members . 93Declarations on single administrative document . 93Goods accepted at appointed places of entry . 93Cargo entering South Africa . 94State warehouses . 94Importation of household effects by immigrants or returning residents . 94Motor vehicles . 94Motor vehicles imported on a temporary basis. 9413.13.113.213.3Excise duties and levies . 95Specific excise duties (Part 2A of Schedule 1 to the Customs and Excise Act). 95Ad valorem excise duties (Part 2B of Schedule1 to the Customs and Excise Act) . 96Fuel levy and Road Accident Fund levy (Parts 5A and 5B of Schedule 1 to theCustoms and Excise Act) . 9713.4 Environmental levy . 97(a) Plastic bags (Part 3A of Schedule 1 to the Customs and Excise Act) . 97(b) Non-renewable electricity generation (Part 3B of Schedule 1 to the Customs andExcise Act) . 98(c) Electric filament lamps (Part 3C of Schedule 1 to the Customs and Excise Act) . 98(d) Carbon dioxide emissions of motor vehicles (Part 3D of Schedule 1 to theCustoms and Excise Act) . 98(e) Tyre environmental levy (Part 3E of Schedule 1 to the Customs and Excise Act) . 99(f) Carbon emissions (Part 3F of Schedule 1 to the Customs and Excise Act) . 9913.5 Health promotion levy . 10013.5.1 Sugary beverages levy (Part 7A of Schedule 1 of the Customs and Excise Act) . 10014.Diamond export levy . 10015.Transfer duty . 10116.Estate duty . 10417.Securities transfer tax . 10518.Skills development levy . 10619.Unemployment Insurance Fund contributions. 10720.Air passenger tax (section 47(B) of Customs and Excise Act) . 10821.Mineral and petroleum resources royalties . 10822.Interest, administrative non-compliance and understatement penalties andcriminal offences for non-compliance with tax legislation (excludingcustoms and excise legislation) .

Taxation in South Africa 2021 i Taxation in South Africa. Preface This is a general guide providing an overview of the most significant tax legislation administered in South Africaby the Commissioner for the South African Revenue Service (SARS), namely, the - Customs and Excise Act; Disaster Management Tax Relief Act;

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