South Africa’s tax system is determined by the laws that the Commissioner must administer. The Income Tax Act 58 of 1962, the VAT Act 89 of 1991 and the Customs and Excise Act 91 of 1964 are the most important of these. Every year, the Minister of Finance presents the Budget, which outlines the total government expenditure for the following financial year and the ways in which this expenditure will be financed.
Recently the Tax Administration Act was introduced and this affects the way SARS deals with you the taxpayer. If you want to read more about the Tax Administration Act please follow the link. It has also brought about the establishment of a Tax Ombud.
South Africa has a residence-based system, which means residents are – subject to certain exclusions – taxed on their worldwide income, irrespective of where their income was earned.
Non-residents are, however, taxed on their income from a South African source. Foreign taxes are offset against South African tax payable on foreign income. The majority of the state’s income is derived from income tax (personal and company tax), although nearly a third of total revenue from national government taxes comes from indirect taxes such as VAT.
Who pays tax?
We have a register of taxpayers and it’s simply the number of active and inactive taxpayers in South Africa. Here at SARS our aim is to grow the register and to reduce the tax gap. The level of growth is influenced by economic conditions, tax policy, legislative amendments, tax-base broadening activities and the overall compliance climate. The register comprises individuals, companies, trusts, employers and VAT vendors.
How do you pay tax?
Income tax returns must be requested by registered taxpayers every year. The year of assessment for individuals covers 12 months, beginning on 1 March and ending on the final day of February the following year. Companies are permitted to have a tax year ending on a date that coincides with their financial year. The Act also provides for certain classes of taxpayers to have a year of assessment ending on a day other than the last day of February.
Tax returns must be submitted to SARS on the date given. Individuals and trusts are required to submit their income tax returns on or before the date published by notice annually in the government gazette.
Companies are required to submit an income tax return within 12 months from the date on which its financial year ends. People whose income comes from sources other than a wage – such as a trade, profession or investments and companies – are required submit two provisional tax returns and where applicable to make two provisional tax payments during the course of the tax year and may opt for a third “topping-up” payment six months after the end of the tax year.
Top tip: Beware people who owe SARS tax are charged interest at a rate as published in the Government Gazette in accordance with the Public Finance Management Act 1 of 1999.