The deemed rate table for the 2007 tax year is:
|Vehicle value (including VAT)||Fixed cost in Rand||Fuel cost (c/km)||Maintenance Cost (c/km)|
|If less than R 40,000||15,364||47,3||22,5|
|More than R 40,000 but less than R 60,000||20,910||49,4||26,2|
|More than R 60,000 but less than R 80,000||25,979||49,4||26,2|
|More than R80,000 but less than R100,000||31,513||54,8||30,5|
|More than R100,000 but less than R120,000||36,978||54,8||30,5|
|More than R120,000 but less than R140,000||41,771||54,8||30,5|
|More than R140,000 but less than R160,000||47,512||57,2||39,8|
|More than R160,000 but less than R180,000||52,629||57,2||39,8|
|More than R180,000 but less than R200,000||58,334||65,9||43,8|
|More than R200,000 but less than R220,000||64,591||65,9||43,8|
|More than R220,000 but less than R240,000||69,072||65,9||43,8|
|More than R240,000 but less than R260,000||74,777||65,9||43,8|
|More than R260,000 but less than R280,000||79,918||69,3||52.8|
|More than R280,000 but less than R300,000||85,440||69,3||52,5|
|More than R300,000 but less than R320,000||88,793||69,3||52,5|
|More than R320,000 but less than R340,000||95,218||69,3||52,5|
See Employee Tax Structuring for the more detailed rules.
The fringe benefit that will be added to an employee for the private usage of a business vehicle is 2.5% of the determined value of the vehicle. A second company vehicle is taxed at 4% on the determined value.
There are exemptions available where the employee uses the vehicle within limits. Also, where less than 10,000km private travel is done, a reduction in fringe benefit tax is possible.
Non-resident employees should see Expatriates regarding their housing benefit.
Where an employer provides an employee with a house, the fringe benefit value is normally the higher of the cost to the employer or a formula calculated on the employee’s salary. Let us know should you require the value calculated.
Subsistence may be claimed where an employee with his normal home in South Africa spends a night away from home on business for the employer. Where a subsistence allowance is paid there is no PAYE deduction on the amount. Certain deemed amounts are expended on such business trips. It must be remembered that these deemed amounts are only claimable where an employer actually pays an employee a subsistence allowance. The deemed claims are limited to the amount of subsistence allowance paid. These deemed amounts were updated and with effect from March 2007:
- Travel outside South Africa: US$190 per day for meals and incidentals
- Travel in South Africa: R196 per day for meals and incidentals
- Travel in South Africa: R60 per day for incidentals only
Every employer in South Africa must withhold PAYE (Pay-as-you-earn) from remuneration paid to an employee. The rate of withholding is determined by the South African Revenue Service and is published in their EMP10 Guidelines. Tax withheld must be paid on or before the 7th day after the month in which remuneration was paid.
It is the employer’s obligation to ensure the correct withholding of PAYE. Where an employer has not withheld the correct amount, it becomes a debt to the South African Revenue Service. When audited, employers often find their tax exposures to be very large and SARS is on a drive to audit all employers.
At the end of a tax year the employer must report the PAYE to SARS on an IRP501 form. This form shows what PAYE was withheld per employee. The income and benefits paid to an employee and the PAYE withheld is also shown on an IRP5 certificate that is handed to the employee. This document is filed by the employee with his or her personal income tax return.
Employees’ tax is a complex area and specific questions will be more easy to answer that attempting to do the topic justice with a more detailed explanation. See Your tax questions.
Unemployment Insurance Fund – UIF
The rules applicable to who pays UIF and the methods of collecting this levy are very similar to PAYE. Employer and employees must contribute to UIF at a rate of 1% respectively. The limits are capped at 116,62 actual contribution for the employer and employee respectively.
Skills Development Levy – SDL
Skills Development Levy (SDL) operates also on similar rules that PAYE and many of the definitions are borrowed from the Income Tax Act. Only employers pay SDL and the rate is 1% of the same employee income on which PAYE is calculated. The payment system is through the same channels as PAYE. Employers paying annual remuneration of less than R500 000 are exempt from paying SDL.
The residency test is very important for any foreigner coming to South Africa or for any South African going abroad. The reasons being primarily that:
- When you are resident of South Africa you pay tax on your worldwide income and as a non-resident you only pay tax on your South African “source” income and certain beneficial exemptions apply; and
- When you loose your South African tax residency, for instance you go work abroad and your circumstances dictate that you become non-resident, there is a deemed disposal of certain of your assets for capital gains tax purposes and this may cause some cash flow problems.
An individual will be tax resident in South Africa by applying the following tests:
Firstly, you will never be tax resident in South Africa should you be tax resident, in terms of a double tax agreement entered between South Africa and a tax treaty partner, in the partner country. An example will be where you go and work in the United Kingdom and you become a full tax resident there while you do not have available accommodation in South Africa. The double tax treaty between South Africa and the United Kingdom will then determine that you are exclusively resident in the United Kingdom and the result is that you become non-resident for South African tax purposes.
Provided the above does not apply, you will be South African tax resident as long as you are “ordinarily resident” in South Africa. The meaning of “ordinarily resident” is that you consider South Africa your real home and plan to return to South Africa. This is the reason why many South Africans overseas remain “ordinarily resident” in South Africa and also the reason why foreign workers coming to South Africa on expatriate assignments ever become “ordinarily resident”.
When you are not treaty resident in another country and you are not “ordinarily resident” in South Africa, it is still possible for you to be tax resident because of a days test. The test determines whether you are tax resident in South Africa for a particular year of assessment and has two legs:
- You are resident if you are, measured over six tax years, more than 91 days in of each of these years in South Africa; and
- In the first five of these six years, you are more than 915 days in South Africa
Should the test be met you will be tax resident in South Africa for the fourth tax year.
The South African Revenue Service now asks specific questions to the above effect in your personal income tax return and has become a lot more aware and active in enforcing the residency tests.
Double Tax Treaties
South Africa has quite an extensive network of double tax treaties with other countries. The treaties are there to prevent tax evasion and to ensure that South African taxpayers do not suffer double taxation. List of the double tax treaties are available on the South African Revenue Service website. Almost all of our treaties are schooled on the OECD Model Tax Treaty and international interpretations will therefore often be given thereto.
Foreign Tax Credit
Foreign tax credits are generally given where a South African tax resident is taxed on income that has already been taxed in another country under a source principle and where any double tax agreement between South Africa and that other country allows that country to tax the income.
We will therefore not give tax credits where we have the right to first collect tax on income. This is pretty standard in all tax systems internationally.
The amount of credit must be claimed in an individual’s income tax return and the amount of credit given is limited to tax on the income being taxed twice. This ensures that tax credits can never be claimed against income that South Africa has the exclusive taxing right on. Exemptions however do exist. Please contact us for details.
South African resident taxpayers who work abroad still need to declare their foreign income in their individual income tax returns. This income can however be exempted form South African tax by claiming a tax exemption where certain conditions of absence have been met. These conditions are:
- It must be employment income; and
- The income must be earned while you where working outside South Africa; and
- The time that you must have been outside South Africa on work must be more than 183 days in any 365 day period and of this 183 days 60 days of absence must have been continuous; and
- The income must become taxable in your hands during the 365 days referred to in the previous point.
This is an important exemption and South Africans working abroad must plan the effect hereof carefully to ensure that they qualify for the exemption.
When you are reading this section when you have to calculate estate duty it is probably to late. Estate duty should be planned well before death. The rate is 20% of the amount determined by the Act as subject to estate duty. There are various exemptions such as everything that goes to a surviving spouse. What ever remains is subject to a standard exemption of R3.5 million per estate.
The following are exempt from transfer duty:
|R100,000 per annum||Donations between spouses||Donations to public benefit organizations that have the necessary approvals|
The rate otherwise is 20%.
Capital Gains Rate
The first R15,000 of an individual taxpayer’s capital gains for a tax year is exempt from capital gains tax. In year of death, this amount is increased to R120,000.
Of the balance of a person’s capital gains, 25% thereof is included in a person’s normal taxable income and taxed at the marginal tax rate. For instance, on a gain of R115,000 and a marginal rate of 40% (therefore the person has other income in excess of R450,000), the capital gains tax will be R115,000 less Exclusion (R15,000) of which 25% (R25,000) is included as taxable. With a marginal tax rate of 40% the effective tax is R25,000 times 40% and therefore R10,000.
The effective rate for companies is 14.5% and for trusts 20%
Transfer to Normal Person:
|First R500,000 of cost of immovable property||0%|
|R500,000 to R1,000,000||5% of the value above R500,000|
|R1,000,000 and above||R25,000 plus 8% of the value above R1,000,000|
The rate for corporate entities and trusts is 8%
Transfer duty is paid where immovable property is acquired and the transaction is not subject to VAT. It also now applies to where the rights of ownership are transferred to immovable property where a company, close corporation or trusts are involved.