The corporate tax system in South Africa is a progressive tax, meaning that the more you earn, the higher your rate of taxation. The standard tax on income for registered companies in South Africa is currently a 28% flat rate. The corporate tax system in South Africa has been the subject of much debate over recent years with some arguing that it is too high and others arguing that it is not high enough.
How are individuals taxed in South Africa?
Individuals are taxed on their income. In South Africa, the tax year runs from 1 April to 31 March.
The person or company that pays the salary deducts tax at source and pays it over to SARS. Income tax is deducted on a progressive scale, so the more you earn, the higher your percentage of tax will be.
Income Tax: The amount of income tax you pay depends on your taxable income and if you are subject to a personal allowance. If you are subject to a personal allowance, then your taxable income is reduced by an amount equal to your personal allowance for each year of assessment. For example, if in 2019/2020 your taxable income exceeds R3 600 000 and you are not entitled to any personal allowance then 100% of your taxable income will be taxed at 40%.
How are personal service providers taxed in South Africa?
The South African Revenue Service (SARS) taxes personal service providers through a progressive income tax system. SARS defines a personal service provider as any individual who provides services to another person for a fee or other form of compensation. This differs from the definition of “self-employed” or “sole trader”, which are terms that are used by the South African Income Tax Act to determine how an individual is taxed.
Personal service providers are taxed on their net income, which is calculated by deducting expenses incurred in providing those services from their gross earnings. Expenses related to providing the services can include such things as travel costs, telephone and internet costs, office supplies, and stationery.
