Tax payers in our country often don’t know what the different types of tax are. Do you? Did you know that the profits of all businesses which operate in South Africa are taxable. As a business owner, you are responsible for filing your annual income tax returns with the South African Revenue Service.
For individuals the tax year commences on 01 March and ends on 28 February the following year, while businesses may decide on their own financial year-end.
Here are the 10 tax types you should know.
1. Income Tax
Income Tax is levied on all your income and profits. This is true whether you are an individual, a company or a trust. Various other types of tax fall under the Income Tax Act, including:
- Capital Gains Tax
- Donations Tax
- Provisional Tax
- Pay As You Earn
Local businesses are taxed 28%, individuals are taxed at 18% and 45%, while Trusts (excluding special trusts) are taxed at 45% on profit.
2. Value Added Tax (VAT)
Value Added Tax applies to all goods and services at a standard VAT tax rate of 15%. However, certain items are zero-rated, e.g. exports, petrol, diesel and basic food items (such as brown bread, milk and fruit).
Some services are exempted from VAT too, for example educational services, public transport and residential rental accommodation.
3. Capital Gains Tax
Capital Gains Tax applies when an asset is disposed of (in other words it changes ownership). Examples are when a property is sold or company shares are acquired.
4. Provisional Tax
Companies automatically fall into the provisional tax system, but anyone who receives income other than remuneration (for example, rental income from property or interest income from investments) is a provisional taxpayer.
Three provisional tax payments based on an estimate of annual income are made during each financial year. The first payment is made after six months and the second at the financial year end. The third payment is made 6 months after the financial year end.
5. PAYE (Pay As You Earn)
When a company employs personnel, tax is deducted from the employee’s salaries. The advantage of this is that tax liability for a year is paid off over 12 months, instead of a lump sum being charged at one time.
6. Transfer Duty
Transfer duty is payable by an individual when they acquire property at progressive marginal rates between 0% and 13%. This type of tax is payable within six months from the date of acquisition.
7. Customs And Excise Taxes
Customs duties are levied on imported goods with the aim of raising revenue and protecting the local market. Excise duties and levies are imposed on the following consumable products:
- petroleum
- alcohol
- tobacco products
- non-essential or luxury items (such as electronic equipment and cosmetics).
The secondary function of these duties and levies is to discourage consumption of certain harmful products .i.e. harmful to human health or to the environment.
8. Donations Tax
Donations tax is payable on the total value of the property disposed of, whether directly or indirectly, by a resident by means of a donation.
Did you know that donations tax is levied at a flat rate of 20% on the value of the property donated?
Taxpayer’s may make donations up to R100 000.00 per annum free of donations tax. Such donations must be made in cash or kind.
If one is using a trust for estate planning (or any other) purposes, such donations might be made to the trust. This has the effect of lowering the personal estate and increasing the assets of the trust.
9. Turnover Tax
Turnover Tax is a simplified tax system only available to sole proprietors, partnerships (you can read the definition of a partnership here), companies or close corporations with a “qualifying turnover” of less than R1m per year. These types of entities are called micro businesses.
Turnover Tax is a type of tax, which is calculated against the turnover of a business, as opposed to a percentage of profit i.e. income less business expenses as per usual business tax.
This difference reduces the administration burden on business owners as there’s less of a need to keep a detailed record of expenses and understand which are deductible for tax purposes.
Turnover tax isn’t available for just any business, though, and you’ll have to meet SARS requirements in order to register.
10. Dividend Tax
Dividends Tax is a tax on beneficial owners e.g. shareholders for companies and members for close corporations when dividends are paid to them.
Dividend tax is withheld from their dividend payment by a withholding agent, either the company paying the dividend or where a regulated intermediary is involved.
A dividend is any payment by a company to a shareholder or close corporation to a member for a share or member’s interest held in that company or close corporation.
Conclusion
Now you know 10 important types of taxes. Which ones apply to you and your business? Comment below.
