Rules For Payroll And Taxation In South Africa
There are specific rules for payroll and taxation in South Africa, depending upon whether your company employs foreign nationals or South Africans. South Africa taxes residents on their worldwide income, whereas non-residents are taxed only on income sourced in South Africa or deemed to be from a source in South Africa.
Any business that employs at least one employee must register with the South African Revenue Service (SARS) for Pay As You Earn (PAYE) and Standard Income Tax on Employees (SITE). Businesses employing staff must also pay a gross revenue or salary-related levy to the district council. Once registered, the business is charged services levies based on its total bill for salaries and wages, as well as on gross sales.
The primary concerns for a foreign company that needs to comply with tax laws in South Africa are: individual income tax for employees, unemployment insurance, payroll tax, VAT tax, withholding tax, business income tax and permanent establishment concerns.
Payroll Options In South Africa
A remote payroll in South Africa is where a foreign company, i.e. a non-resident company, payrolls a resident employee in South Africa. One option for a non-resident company is to payroll its employees (local and foreign) in South Africa is to use a fully outsourced service like a GEO, which will employ and payroll the staff on their behalf.
In some cases, a company will register their business in South Africa under one of the forms available, (Branch Office or Company) but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. However, the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to South Africa may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a South African payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant costs and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with South African employment laws.
Employment And Payroll Outsourcing
Companies can outsource the employment and payroll of their staff in South Africa to a GEO, like Shield GEO. This is possible for South African nationals and foreigners. The GEO manages all aspects of payroll for workers in South Africa including taxes, withholding, social security payments and other statutory requirements. The GEO becomes the Employer of Record and employs the staff on behalf of the client.
Staff are paid monthly with tax and social security deducted at source and paid to local authorities. The GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Business Income Tax) and a Management Fee. The GEO provides the employees with payslips.
Why Do We Pay Taxes?
Governments provide public services such as police services and roads to the public. The government also pays the salaries of civil servants. The public does not pay directly for these goods and services or for the time of public servants when they visit government offices, but indirectly be means of taxation. The government must therefore regularly decide how much to spend, what to spend it on and how to finance its expenditure. This is the reason why we pay taxes.
We all want government services such as better education, more policing and better roads. All these things cost money.
The government is faced by continuous demands to increase its expenditure as people want more goods and services from the government. These demands include free houses and free basic services such as electricity and water. The provision of these services to the needy, paid for by means of taxes raised from the more fortunate, amounts to a large redistribution of income from the payers to the recipients.
