South Africa legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group assists our Clients with timely compliance of their annual legal, accounting and tax obligations in South Africa.
Corporate Income Tax
- A South African resident company is subject to corporate income tax of a flat 27% on its worldwide income, irrespective of the source of income.
- Non-residents are taxable on South Africa-sourced income, also at a flat rate of 27%.
- Small business corporations with only natural persons as members/owners, and with gross income of not more than 20 million South African rand (ZAR), are taxed at the following rates:
- 0% on the first ZAR95,750 of taxable income.
- 7% on taxable income above ZAR95,750 but not exceeding ZAR365,000.
- ZAR 18,848 + 21% on taxable income above ZAR365,000 but not exceeding ZAR550,000.
- ZAR 57,698 + 27% on taxable income exceeding ZAR550,000.
- Companies with a turnover of less than ZAR1 million per year can elect to pay alternative turnover-based tax instead of normal CIT, at a rate ranging from 0% to 3%, depending on the level of turnover.
Withholding taxes/capital gains tax
- There are no withholding taxes on royalties or interest payments for South Africa residents.
- Resident companies are exempt from dividend withholding taxes while making payments to South Africa residents. If payments are to a non-resident, they are subject to 20% withholding tax.
- Dividends paid to a non-resident company may be 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 are subject to 15% withholding tax.
- Capital gains tax for corporates 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.
- 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).
- From the date a South African company hires it’s first employee, it is mandatory that the company registers for Pay As You Earn (PAYE) Unemployment Insurance Fund (UIF) and Workman’s Compensation.
- A company is required to contribute to the Skills Development Levy (SDL) when payroll costs exceed ZAR500,000 (US$32,750)
Value Added Tax (VAT)
- VAT is levied at two rates: standard rate (15%) and a zero rate (0%).
- The list of zero-rated items in the Value-Added Tax Act include white bread flour, cake flour, and sanitary pads.
- A company is required to register for VAT once the value exceeds ZAR100,000 (approximately US$58,000).
- Financial services, residential accommodation and public transport are 100% VAT-exempt.
Filing due dates
- Tax year is the calendar year. However, companies are free to adopt their own fiscal year end. Annual income tax returns must be submitted within one year from the end of the company’s tax year.
- Payments are made with provisional returns filed at six-month intervals from the tax year-end based on an estimate of taxable income for the year.
- All South Africa-incorporated companies must file their corporate tax return electronically via the South African Revenue Service (SARS) portal.
- Companies with annual revenue exceeding US$2.8 million must file monthly VAT returns. All other companies must file returns every two months.
- SARS recommends a company appoint a certified auditor when filing corporation tax returns. Healy Consultants Group is happy to act as your auditor in South Africa to ensure the timely, accurate filing of your corporate tax return.
Consequences of late / non-filing of tax returns
- The SARS levies a range of penalties for tax filing offences. The penalties for not submitting a tax return are set out in Chapter 15 of the Tax Administration Act. They differ according to the behaviour of the taxpayer.
- The failure by a provisional taxpayer to make payment on time will result in the imposition penalty for late payment of provisional tax calculated at 10% of the provisional tax amount not paid.
Tax exemptions and rebates
South Africa has a network of Double Taxation Treaties with 27 countries around the world. These treaties help reduce withholding tax in South Africa on overseas income.
South Africa Company Legal Tax Exemption
- Non-resident foreign-incorporated companies which operate through a South African branch, or which have a permanent establishment within South Africa, can avail of tax exemptions on income generated outside South Africa.
- A company is considered resident in South Africa if it has been incorporated there. However, if a South Africa-incorporated company is deemed exclusively resident in another country, it is excluded from South African residency.
- To be South Africa tax-exempt, a company needs to be tax resident in a country with which South Africa has a tax treaty and be paying taxes there. If so, it is only taxable in South Africa on South Africa-sourced income, and taxable on all other income in the resident country.
- A non-resident South African Limited Liability Partnership (LLP) is legally tax exempt of South African taxes. To enjoy this benefit, it is important the LLP i) has a multi-currency corporate bank account outside of South Africa ii) is not a permanent establishment in South Africa and iii) has neither customers nor suppliers in South Africa.
- South Africa LLPs are not popular, and when they are registered, as least one partner must reside in South Africa for the agreement to be valid. Therefore, they will usually be subject to some South African income tax.
Table of comparison between South Africa onshore, offshore and LLP entities
No Task Taxable
South Africa LLP
South Africa LLC
South Africa LLC
1. South Africa corporation tax 0% * 0% * 28% 2. Corporate bank account location? Inside or outside SA Outside SA South Africa 3. Management and control of entity? Inside SA Outside SA South Africa 4. Can do business with South African customers? Yes No Yes 5. Resident director/partner required Yes No No 6. Can have South African employees/physical office premises? Yes No Yes 7. Legal registered office and virtual office address where? Cape Town Cape Town Cape Town 8. Annual financial statements and South Africa tax return to be filed? Yes No Yes 9. Must register branch in country where our Client lives or has an office? No No No 10. Must register for VAT/GST/Sales tax In South Africa? Yes No Yes 11. Must visit South Africa once a year? N/A No No 12. Public register of shareholders and directors? No Yes (click link) Yes 13. Access to international double taxation treaties? No No Yes (click link) 14. Must be resident in country South Africa has tax treaty with to be tax exempt in South Africa? N/A Yes (click link) N/A
* Each of the partners in the LLP will be taxed individually on their share of the profits at approximately 18%-45%. All LLP income must be disclosed to SARS.
Tax reporting, accounting and auditing considerations
- Our Clients must retain all supporting documents related to a return for five years from the date of submission of the return or five years from the end of the relevant tax period.
- Financial statements must be prepared annually, according to International Financial Reporting Standards (IFRS).
- Tax debts to the state prescribe after a period of 15 years.
- Tax returns submitted that have been assessed may not be reopened after a period of three years from date of assessment by the SARS or five years if it is a self-assessment by the taxpayer, unless there has been fraud, misrepresentation, or non-disclosure by the taxpayer.
- There is no prescribed tax audit process, and an audit can be initiated by any factor as determined by the SARS.
- Every South African company is required to appoint a public officer to their company who will be a SARS’ first point of contact for all tax-related queries. The public officer must be an individual who is a tax resident in South Africa.
Healy Consultants Group fees for accounting and tax support
South Africa accounting & tax task US$ SARS Income tax and E-Filing registrations 750 VAT Registration 1,650 Annual tax and accounting fees (active trading company) 2,300 Annual tax and accounting fees (dormant company) 950 South Africa Public Officer services for 12 months 3,150
These accounting and tax fees are an estimate of Healy Consultants Group fees to efficiently discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.
Monthly bookkeeping service
Healy Consultants Group will be happy to provide a monthly book-keeping service for your South African company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.
For further details of our book-keeping service and our fees, visit this page.