South Africa accounting and tax considerations
Healy Consultants Group PLC has been assisting Clients with South Africa accounting and tax services since 2003, and we have years of experience working with the country’s tax authority.
VAT and corporation tax
- Value Added Tax (VAT) is levied at a fixed 15%;
- A company is required to register for VAT once the value exceeds R1,000,000 (approximately US$58,000);
- Companies with annual revenue exceeding US$2.8 million must file monthly VAT returns. All other companies must file returns every two months;
- Exports, certain food items and other supplies are zero-rated for VAT;
- Financial services, residential accommodation and public transport are 100% VAT-exempt;
- Companies with annual turnover exceeding US$1.6 million pay 28% tax on global income;
- Companies under this turnover threshold pay income tax of between 0% and 28%.
Withholding taxes/capital gains tax
- There are no withholding taxes on dividends, royalties or interest payments;
- Dividends paid from a South Africa-resident company are subject to 15% withholding tax;
- Dividends paid to a non-resident company are tax-exempt if the receiving entity holds at least a 10% stake in the repatriating entity;
- Royalty and interest payments made to a non-resident entity are subject to 15% withholding tax;
- Capital gains tax is 22.4%. Capital gains imposed on a resident company from the sale of holdings in a foreign company are tax-exempt if the resident company owns at least a 10% stake in the foreign company;
- Transfers of securities are subject to 0.25% tax;
- South Africa has Double Taxation Treaties with countries around the world, including Australia, Canada, China, Singapore, the UK and USA. These treaties ease tax burdens on foreign payments.
- Employers pay a 1% contribution to an employee’s social security fund;
- Companies with payroll costs exceeding US$34,500 (ZAR500,000) pay a 1% Skills Development Levy (SDL) to fund training and re-training programs;
- Employers contribute 2% of an employee’s salary to the Unemployment Insurance Fund (UIF).
Financial statements and filings
- Under the Companies Act audit requirement, an audit of financial statements is mandatory for large public and state-owned companies;
- All South African companies must have accounts reviewed annually by a third-party accountant;
- Most South Africa companies’ financial year-end is 28 February;
- Tax filing and provisional tax filing due dates are 28 February and 31 August each year;
- All South African registered companies must file annual tax returns within 12 months of the end of the company’s accounting year. The annual return due date is 30 May each year;
- Where provisional tax applies, payment is due twice a year, with the first payment due within six months of the accounting year, and the second at the accounting year-end.
Legal and compliance considerations
- Each South Africa LLC must have at least one director and one shareholder;
- A PLC must have at least three directors and seven shareholders. There is no restriction on nationality or domiciliation of these individuals;
- Every South Africa-registered company must appoint a Public Officer tax-resident and domiciled in South Africa;
- A South Africa branch office must have an individual appointed as the branch representative, who is a tax-resident and domiciled in South Africa;
- Each company must lodge a Notice of Incorporation and Memorandum of Incorporation with the Companies and Intellectual Property Commission (CIPC);
- Under the 2008 Companies Act, all South Africa-resident businesses must have a registered office in the country;
- South Africa imposes foreign exchange controls requiring all resident companies to obtain prior approvals from the Reserve Bank when transferring money in or out of the country, regardless of transaction size. Select banks in South Africa are authorised to issue these approvals on behalf of the Reserve Bank;
- Anti-trust laws prevent South Africa-resident companies from entering contracts which form cartels or monopolies.
- All companies must register with the Department of Labor for Unemployment Insurance when hiring employees;
- The maximum average work week for an employee in South Africa, as defined in South African labour law, is 45 hours. Beyond this, the employer pays overtime;
- The national minimum wage is R20.76 (US$1.5) per hour;
- An employee is entitled to annual paid leave of 15 working days and paid sick leave of 10 days;
- In 2007, South Africa imposed The Black Economic Empowerment (BEE) Certificate to promote entrepreneurship and employment of black and Indian people. Under this law, local businesses are audited annually to determine whether the business hires black/Indian employees or works with black/Indian contractors. Companies with a turnover below US$700,000 (ZAR12.1 million) are exempt from the audit.