How Is Income Tax Collected In South Africa?

By Dave Nyam •  Updated: 01/23/24 •  5 min read

Income tax offers the bulk of earnings for the South African government. All kinds of earnings, including citizens, organizations, and trusts, are liable to this remittance. Regarding tariffs, the South African Revenue Service (SARS) is the body in control. Various methods exist for SARS to collect income tax, including withholding funds prior to payment, requesting payments throughout the year, verifying tax returns, and reviewing data. Numerous public services, such as healthcare, education, transportation, pensions, and the military, are funded through income taxes.

- ADVERTISEMENT -

How is tax collected in South Africa?

People in South Africa pay taxes, which goes toward funding the government. There are both direct and indirect taxes involved here. Income, capital gains, dividends, donations, and estate duties are all direct tariffs levied on financial assets possessed by citizens or agencies. The items and services that citizens and organizations trade and maximize are liable to indirect tariffs such as value-added tax (VAT), customs duty, excise duty, fuel levy, and environmental levy.

Government agencies get varying forms of taxation from a vast range of sources. Most of the earnings from tariffs like income, value-added, customs, and excise head to the federal government. Tariffs on gaming, alcoholic drinks, and driver’s permits head to the provincial government. Income from taxes, such as property taxes, power surcharges, and garbage fees, goes toward local government funding.

The kind and location of the tax determine which entities are responsible for collecting it. Tariffs like income, VAT, customs, excise, and others are primarily fetched by SARS. Varied extra bodies are responsible for fetching tariffs; these include the National Treasury, which is in control of fuel and environmental levies; the Department of Trade and Industry, which is in control of gaming and liquor tariffs; and the varied local governments, which are in control of fetching property rates and other charges.

Who collects income tax in SA?

SARS, the taxman in South Africa, collects income tax from various sources.

Individuals? They’re taxed on their earnings from their jobs, businesses, investments, and so on. The tariff rate scales from 18 percent to 45 percent, based on the figure they receive. They must file a tariff return every year and clear any taxes due.

Companies aren’t left out. They’re taxed at a flat rate of 28 percent on their income. They, too, have to file an annual tax return and square up with SARS.

Trusts also have their share. They’re taxed at a flat rate of 45 percent on their income. Like anybody else, they must file a yearly tariff return and clear up.

- ADVERTISEMENT -

And next, other bodies like alliances, co-operatives, societies, associations, and non-profit companies add up. They’re taxed according to different rules and rates based on what they are and what they do. They must also file an annual tax return and pay their tax liability. It’s a busy time for everyone when tax season rolls around!

How does SARS collect tax?

SARS, South Africa’s tax authority, has a few tricks up its sleeve when it comes to collecting taxes.

First off, there’s withholding tax. This is when the payer, say your employer or bank, holds back a portion of your earnings or interest and sends it straight to SARS.

Next, we have provisional tax. This is for folks with income other than a salary, like a business or rental property. They pay their estimated taxes in two or three installments throughout the year.

Then there’s the self-assessment tax. When filing your annual income tax return, you calculate your taxable income and tax liability.

Lastly, SARS conducts tax audits. They check all your submitted information and documents to ensure everything’s above board. You could incur additional tax, penalties, and interest if they find any discrepancies or errors. As a result, it’s always indispensable to keep every detail precise and up-to-date!

What differentiates income tax and PAYE?

Each tariff on the cash you earn or generate, like wages, profits, compensations, capital gains, etc., is called “income tax.” Based on your yearly taxable earnings, SARS computes the income tax figure you owe, which you should clear after filing your income tariff return for that year.

On the other hand, the Pay As You Earn, mostly known as the PAYE system, discharges income tariffs in advance. By paying income tax and occasionally social insurance benefit taxes directly to SARS on your behalf, your employer is said to be participating in PAYE. Your company will provide you with an IRP5 certificate detailing your earnings and taxes paid. On this certificate, PAYE is displayed.

In other words, income tax represents the tax you owe in reality, whereas PAYE represents the tax you have previously paid. Following their assessment of your income tax return, SARS deducts PAYE from your income tax liability and either pays the remaining amount or reimburses you.

- ADVERTISEMENT -

Keep Reading

Difference Between VAT and TAX?

Difference Between VAT and TAX?

What Is the Difference Between VAT and Tax in South Africa? This guide explains the difference between VAT and tax. 

How to Change From Paye to Provisional Taxpayer

How to Change From Paye to Provisional Taxpayer

More highlights will be on registering as a provisional taxpayer and calculating your first tax as a provisional taxpayer. 

What You Should Know About Taxation on Inherited Property

What You Should Know About Taxation on Inherited Property

Today we are covering the basics of inheritance taxation in South Africa, especially regarding property you may receive from the deceased.

How Does Auto-Assessment Work?

How Does Auto-Assessment Work?

Today we are unpacking some of the key aspects of this new system, and what you should know about it.

Reasons Why Your Tax Refund Might Be Delayed

Reasons Why Your Tax Refund Might Be Delayed

Today, we’re exploring more about the South African tax refund process, what often delays it, and how you can aim for the smoothest possible experience.

How Many Times Can I Revise Tax Return?

How Many Times Can I Revise Tax Return?

so today we’ve compiled this guide to help, exploring everything you need to know about tax return revisions and SARS.

How Does Tax On Bonuses Work in South Africa?

How Does Tax On Bonuses Work in South Africa?

How Does Tax On Bonuses Work in South Africa? We are here with this helpful guide to taxation and bonuses in South Africa.

Savings Tax in South Africa

Savings Tax in South Africa

Today we will be looking at all things tax- and savings-related, from the amount of money you can keep in your bank account without taxation

IT12EI – Return of Income Tax Exempt Organisation

IT12EI – Return of Income Tax Exempt Organisation

This article explains the measures you can take to file your return of income for an organization(IT12EI ) that does not pay tax. 

Who Qualifies for Tax Returns in South Africa?

Who Qualifies for Tax Returns in South Africa?

Not everyone qualifies for tax returns. This article explains everything you want to know about tax returns. 

Where to Get A Medical Scheme Tax Certificate?

Where to Get A Medical Scheme Tax Certificate?

Here’s everything you need to know about medical scheme tax certificates, which are a critical part of proving your medical aid expenditure

Exploring the Tax Implications of Gifts in South Africa

Exploring the Tax Implications of Gifts in South Africa

Today, we will unpack everything you need to know about this tax type to ensure you stay on the right side of the tax

What is the Carbon Tax in South Africa?

What is the Carbon Tax in South Africa?

What is the Carbon Tax in South Africa? Today we will be unpacking some CBT basics you should be aware of.

What Is Tax Rebate?

What Is Tax Rebate?

What Is Tax Rebate?. This exhaustive handbook delves into tax rebates, spotlighting South Africa

All About Driving Tax in South Africa

All About Driving Tax in South Africa

Today we will be looking deeper into the ‘driving taxes’ we pay in South Africa, and everything you should know to stay compliant with them.