South Africa: Business Environment
In general, expenses incurred for the purposes of income generation are deductible.
The majority of taxes (with the exception of income taxes, donations tax, withholding taxes on interest, and dividends tax) are deductible from a company’s taxable income, provided they qualify for deduction under general rules. Losses may be carried forward indefinitely, as long as an active trade or business of a similar nature is carried on without interruption. For tax years ending on or after 31 March 2023, companies with assessed losses will be entitled to set off a maximum of 80% of such losses (subject to a minimum of ZAR 1 million) against taxable income in a specific year. Loss carrybacks are not allowed.
Special relief is provided for start-up expenditure: when expenses would have been deductible had they been incurred after the commencement of trade, they are ring-fenced and may only be deducted against income from the trade to which the start-up costs relate. In general, interest expenditure incurred in the production of non-exempt income and for the purposes of trade is deductible.
Charitable contributions to certain approved public benefit organisations are tax-deductible (capped at 10% of taxable income).
If a taxpayer has included a certain amount in their taxable income in any tax year, and that amount becomes a bad debt at the end of the year of assessment, it may be tax deductible. Additionally, there is a tax allowance for doubtful debts. In the case of bad debts arising from loaned money, it is deductible only if it was lent as part of a money-lending business. Taxpayers may claim tax deductions for donations made to public benefit organisations that have been approved as charitable organisations, subject to a limit of 10% of their taxable income.
Foreign tax paid on foreign-source income may be credited against South African tax on the same profits, limited to the amount of South African tax payable on the foreign income.
Tax incentives are also provided for small business corporations, R&D, urban development, infrastructure development, public-private partnership grants, environmental expenditure deductions, energy efficiency savings, companies located in Special Economic Zones, etc.
Micro-businesses with annual turnovers under ZAR 1 million may elect to be taxed under a micro-business tax system instead of the ordinary income tax, provisional tax, capital gains tax and VAT systems (at rates varying between 0% and 3% of turnover). Micro-businesses that qualify for the scheme can voluntarily exit the system at the end of any year of assessment. However, once out of it, they will not be permitted to re-enter.
Other special taxes include a 20% withholding tax on payments made to non-residents, individuals, and trusts for services provided, a 15% withholding tax on foreign entertainers and sportspersons, as well as a withholding tax on the acquisition of South African property by a non-resident. A tax on dividends applies to all South African resident companies as well as non-resident companies listed on the JSE at a rate of 20%.
Municipal taxes, a transfer tax on securities (0.25%), environmental taxes, financial transaction taxes, electricity and fuel levies, and donations taxes also apply (20% of the property with a value up to ZAR 30 million, 25% above this threshold; an annual exemption of ZAR 10,000 is available for companies; public companies are exempt from the donations tax). A skills development levy is payable monthly by the employers at the rate of 1% of payroll (companies with an annual payroll of less than ZAR 500,000 are exempt). Employers also contribute to the Unemployment Insurance Fund (1% of the employee’s gross remuneration, capped at ZAR 177.12 monthly) and to the fund for compensation for occupational injuries and diseases (rates vary depending on the sector of activity, salary capped at ZAR 506,473 per year/employee).
Local municipalities levy rates on land based on a percentage of the municipal valuation of land and improvements, which vary from municipality to municipality. Properties zoned for business use are generally taxed at a higher rate.
Transfer duty levied on the sale of immovable property is payable by the person acquiring the property within six months from the date of acquisition. Rates vary between 0% and 13% of the purchase price (the first ZAR 1.1 million is exempt). Transfers of immovable property subject to VAT are exempt from transfer duty.
Several environmental taxes apply, including a vehicle emissions tax, a fuel levy, a tyre levy and an electricity levy.
South Africa | Sub-Saharan Africa | United States | Germany | |
Number of Payments of Taxes per Year | 7.0 | 36.6 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 210.0 | 284.8 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 29.2 | 47.3 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
Individual tax rates (tax year commencing on 1 March 2023 and ending on 29 February 2024) | |
ZAR 0 to 237,100 | 18% |
ZAR 237,101 to 370,500 | 42,678 + 26% of taxable income on the excess |
ZAR 370,501 to 512,800 | 77,362 + 31% of taxable income on the excess |
ZAR 512,801 to 673,000 | 121,475 + 36% of taxable income on the excess |
ZAR 673,001 to 857,900 | 179,147 + 39% of taxable income on the excess |
ZAR 857,901 to 1,817,000 | 251,258 + 41% of taxable income on the excess |
ZAR 1,817,001 and above | 644,489 + 45% of taxable income on the excess |
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Latest Update: November 2023