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Tax

Tax is an amount of money that the government imposes on you in order to fund its expenditure. This money is deducted from your salary, business profits, or from the goods and services you consume.

It’s also collected from imported goods, and individuals pay personal income tax, such as the pay-as-you-earn. Businesses pay corporate tax, and consumers pay value-added tax (VAT). 

According to the South African Revenue of Services (SARS), most of the country’s revenue comes from income tax and one-third of it comes from VAT.

Why do you need to pay tax?

Among other things, the tax you pay is used to build roads, hospitals, schools, houses, and libraries. It is also used to ensure that the country is safe and secure. Your taxes also help to pay public servants’ salaries and for programs that help the poor citizens of the country.

Paying tax is compulsory. SARS could use several methods to collect the money you owe if you don’t comply. Your salary could be attached; your bank accounts, both inside and outside the country, could be frozen. It can also sequestrate or liquidate your estate, or even issue a judgment against your name. All this could damage your credit record, making it difficult for you to obtain credit.

What are the different types of taxes?

The South African Revenue Services lists about 21 kinds of taxes that are paid by citizens, but some of these were repealed. The following are the most important, or relevant to you: 

Income tax

This is tax that is deducted from your salary, company’s profit, and from your trust funds.

There are many other kinds of taxes that fall under income tax. These include: pay-as-you-earn (PAYE), corporate tax, and provisional tax.

  • PAYE: This refers to the amount that is deducted by your employer from your salary. This amount must be paid by your employer to SARS within seven days after the end of the month. You should note that not everyone who is employed pays tax. Low-income employees are usually exempt from paying tax. Check with SARS or your employer to see if you’re eligible to pay tax or not.
  • Corporate income tax: It’s imposed on all companies that operate within the country, whether they’re resident or non-resident companies – as long as their income comes from South Africa.
  • Provisional tax: This applies to individuals whose source of income is not a salary – for example commission earners, and independent contractors. Interest from investment, and rental income also falls under provisional tax.

Value Added Tax

VAT applies to the goods and services you consume. This tax is paid indirectly, and you don’t have to do anything on your side. It is already added on the price you pay for goods and services. Currently, it stands at 15%. However, certain goods are zero-rated – meaning that they are exempt from tax. Those goods include fuel, basic food items, and other services, such as transport.

What is a tax return?

Once a year, you’re required to file a document that states how much income you made so that the revenue services can calculate how much tax you owe. If you paid more tax than you were required, the tax authority will refund you. If you paid less, you will be required to pay all that is due.

How do you file tax returns?

Once a year, SARS opens tax season which runs from July to November, where you’re required to submit your tax-related information. The following documents will be required:

  • IRP5 (a form that you receive from your employer if you’re employed)
  • Bank statements
  • Documents and receipts for commission-related expenditure
  • Income tax certificate from your medical scheme
  • Your marriage certificate if you’re married.

You can either visit SARS branches around the country, or you can use the online system. For more information on the documents you need to file your tax returns, visit SARS.

What if you don’t file your tax returns?

Not everyone is required to submit their tax returns. People who fall under a certain income threshold, or who are over 65 are not required to submit their tax returns. However, if you’re required to do so and you fail, you will incur a certain penalty. 

For more information about tax returns, visit SARS, or get in touch with our partner TaxTim.

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