2018 Budget - Pocket tax guide

This tax guide provides a synopsis of the most important tax, duty and levy information for 2018/19.

 

INCOME TAX: INDIVIDUALS AND TRUSTS

Tax rates for the period 1 March 2018 to 28 February 2019 Individuals and special trusts

Taxable Income (R)

Rate of Tax (R)

0 - 195 850

18% of taxable income

195 851 - 305 850

35 253 + 26% of taxable income above 195 850

305 851 - 423 300

63 853 + 31% of taxable income above 305 850

423 301 - 555 600

100 263 + 36% of taxable income above 423 300

555 601 - 708 310

147 891 + 39% of taxable income above 555 600

708 311 - 500 000

207 448 + 41% of taxable income above 708 310

1 500 001 and above

532 041 + 45% of taxable income above 1 500 000

Trusts other than special trusts: rate of rax 45%

Rebates

Primary

Secondary (Persons 65 and older)

Tertiary (Persons 75 and older)

Age

Below age 65
Age 65 to below 75
Age 75 and over

Provisional Tax

A provisional taxpayer is any person who earns income by way of remuneration from an unregistered employer, or income that is not remuneration or an allowance or advance payable by the person's principal. An individual is not required to pay provisional tax if the individual does not carry on any business and the individual's taxable income -

  • will not exceed the tax threshold for the tax year; or
  • the tax determined by the application of the tax table to the aggregate of amount Y plus all other retirement fund lump sum benefits accruing from October 2007 and all retirement fund lump sum withdrawal benefits accruing from March 2009 and all other severance benefits accruing from March 2011; less
  • the tax determined by the application of the tax table to the aggregate of all retirement fund lump sum benefits accruing before lump sum Y from October 2007 and all retirement fund lump sum withdrawal benefits accruing from March 2009 and all severance benefits accruing before severance benefit Y from March 2011.

Dividends

Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals. Dividends received by South African resident individuals from REITs (listed and regulated property owning companies) are subject to income tax and non-residents in receipt of those dividends are only subject to dividends tax.

Foreign Dividends

Most foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%. No deductions are allowed for expenditure to produce foreign dividends.

Interest exemptions

  • Interest earned from a South African source by any individual under 65 years, up to R23 800 per annum, and individuals 65 and older, up to R34 500 per annum, is exempt from income tax.

Allowances

Subsistence allowances and advances

Where the recipient is obliged to spend at least one night away from his or her usual place of residence on business and the accommodation to which that allowance or advance relates is in the Republic of South Africa and the allowance or advance is granted to pay for -

  • meals and incidental costs, an amount of R416 per day is deemed to have been expended;
  • incidental costs only, an amount of R128 for each day which falls within the period is deemed to have been expended.

Where the accommodation to which that allowance or advance relates is outside the Republic of South Africa, a specific amount per country is deemed to have been expended. Details of these amounts are published on the SARS website under Legal Counsel / Secondary Legislation / Income Tax Notices / 2018.

Travelling allowance

Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined by using the following table:

Value of the vehicle

Fixed cost

Fuel cost

Maintenance

(including VAT) (R)

(R p.a.)

(c/km)

cost (c/km)

0 - 85 000

28 352

95.7

34.4

85 001 - 170 000

50 631

106.8

43.1

170 001 - 255 000

72 983

116.0

47.5

255 001 - 340 000

92 683

124.8

51.9

340 001 - 425 000

1 12 443

133.5

60.9

425 001 - 510 000

133147

153.2

71.6

510 001 - 595 000

1 53 850

158.4

88.9

exceeding 595 000

1 53 850

158.4

88.9

Note:

R14 067 R7 713 R2 574

Tax Threshold

R78 150 R121 000 R135 300

  • from interest, dividends, foreign dividends, rental from the letting of fixed property and remuneration from an unregistered employer will be R30 000 or less for the tax year.

Provisional tax returns showing an estimation of total taxable income for the year of assessment are required from provisional taxpayers.

Deceased estates are not provisional taxpayers.

Retirement fund lump sum withdrawal benefits

Taxable Income (R)

Rate of Tax (R)

0 - 25 000

0% of taxable income

2 5 001 - 660 000

18% of taxable income above 25 000

660 001 - 990 000

114 300 + 27% of taxable income above 660 000

990 001 and above

203 400 + 36% of taxable income above 990 000

Retirement fund lump sum withdrawal benefits consist of lump sums from a pension, pension preservation, provident, provident preservation or retirement annuity fund on withdrawal (including assignment in terms of a divorce order).

Tax on a specific retirement fund lump sum withdrawal benefit (lump sum X) is equal to -

  • the tax determined by the application of the tax table to the aggregate of lump sum X plus all other retirement fund lump sum withdrawal benefits accruing from March 2009, all retirement fund lump sum benefits accruing from October 2007 and all severance benefits accruing from March 2011; less
  • the tax determined by the application of the tax table to the aggregate of all retirement fund lump sum withdrawal benefits accruing before lump sum X from March 2009, all retirement fund lump sum benefits accruing from October 2007 and all severance benefits accruing from March 2011.

Retirement fund lump sum benefits or severance benefits

Taxable Income (R)

Rate of Tax (R)

0 - 500 000

0% of taxable income

500 001 - 700 000

18% of taxable income above 500 000

700 001 - 1 050 000

36 000 + 27% of taxable income above 700 000

1 050 001 and above

130 500 + 36% of taxable income above 1 050 000

Retirement fund lump sum benefits consist of lump sums from a pension, pension preservation, provident, provident preservation or retirement annuity fund on death, retirement or termination of employment due to attaining the age of 55 years, sickness, accident, injury, incapacity, redundancy or termination of the employer's trade.

Severance benefits consist of lump sums from or by arrangement with an employer due to relinquishment, termination, loss, repudiation, cancellation or variation of a person's office or employment.

Tax on a specific retirement fund lump sum benefit or a severance benefit (lump sum or severance benefit Y) is equal to -

  • Interest earned by non-residents who are physically absent from South Africa for at least 181 days during the 12-month period before the interest accrues and the debt from which the interest arises is not effectively connected to a fixed place of business in South Africa, is exempt.

Deductions

Retirement fund contributions

Amounts contributed to pension, provident and retirement annuity funds during a year of assessment are deductible by members of those funds. Amounts contributed by employers and taxed as fringe benefits are treated as contributions by the individual employees. The deduction is limited to 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement fund lump sums and severance benefits). The deduction is further limited to the lower of R350 000 or 27.5% of taxable income before the inclusion of a taxable capital gain. Any contributions exceeding the limitations are carried forward to the immediately following year of assessment and are deemed to be contributed in that following year. The amounts carried forward are reduced by contributions set off against retirement fund lump sums and against retirement annuities.

Medical and disability expenses

In determining tax payable, individuals are allowed to deduct -

  • monthly contributions to medical schemes (a tax rebate referred to as a medical scheme fees tax credit) up to R310 each for the individual who paid the contributions and the first dependant on the medical scheme and R209 for each additional dependant; and
  • in the case of -
  • an individual who is 65 and older, or if an individual, his or her spouse, or his or her child is a person with a disability, 33.3% of the sum of qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed 3 times the medical scheme fees tax credits for the tax year; or
  • any other individual, 25% of an amount equal to the sum of qualifying medical expenses paid and borne by the individual and an amount by which medical scheme contributions paid by the individual exceed 4 times the medical scheme fees tax credits for the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).

Donations

Deductions in respect of donations to certain public benefit organisations are limited to 10% of taxable income (excluding retirement fund lump sums and severance benefits). The amount of donations exceeding 10% of the taxable income is treated as a donation to qualifying public benefit organisations in the following tax year.

80% of the travelling allowance must be included in the employee's remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).

The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance.

Alternative simplified method:

Where an allowance or advance is based on the actual distance travelled by the employee for business purposes, no tax is payable on an allowance paid by an employer to an employee up to the rate of 361 cents per kilometre, regardless of the value of the vehicle. However, this alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.

 

 

Other deductions

Other than the deductions set out above an individual may only claim deductions against employment income or allowances in limited specified situations, e.g. bad debt in respect of salary.

 

Events that trigger a disposal include a sale, donation, exchange, loss, death and emigration. The following are some of the specific exclusions:

• R2 million gain or loss on the disposal of a primary residence

 

A basic deduction of R3.5 million is allowed in the determination of an estate's liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses.

Donations Tax

 

Fringe Benefits Employer-owned vehicles

•       The taxable value is 3.5% of the determined value (the cash cost including VAT) per month of each vehicle. Where the vehicle is -

•       the subject of a maintenance plan when the employer acquired the vehicle the taxable value is 3,25% of the determined value; or

•       acquired by the employer under an operating lease the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel.

•       80% of the fringe benefit must be included in the employee's remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

•       On assessment the fringe benefit for the tax year is reduced by the ratio of the distance travelled for business purposes substantiated by a log book divided by the actual distance travelled during the tax year.

•       On assessment further relief is available for the cost of licence, insurance, maintenance and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a log book.

Interest-free or low-interest loans

The difference between interest charged at the official rate and the actual amount of interest charged, is to be included in gross income.

Residential accommodation

The value of the fringe benefit to be included in gross income is the lower of the benefit calculated by applying a prescribed formula or the cost to the employer if the employer does not have full ownership of the accommodation.

The formula will apply if the accommodation is owned by the employee, but it does not apply to holiday accommodation hired by the employer from non-associated Institutions.

INCOME TAX: COMPANIES

 

Financial years ending on any date between 1 April 2018 and 31 March 2019

 

Type

Rate of Tax (R)

Companies

28% of taxable income

INCOME TAX: SMALL BUSINESS CORPORATIONS

Financial years ending on any date between 1 April 2018 and 31 March 2019

 

Taxable Income (R)

Rate of Tax (R)

0 - 78 150

0% of taxable income

78 1 51 - 365 000

7% of taxable income above 78 150

365 001 - 550 000

20 080 + 21% of taxable income above 365 000

550 001 and above

58 930 + 28% of the amount above 550 000

 

TURNOVER TAX FOR MICRO BUSINESSES

Financial years ending on any date between 1 March 2018 and 28 February 2019

Taxable turnover (R)

Rate of tax (R)

0 - 335 000

0% of taxable turnover

335 001 - 500 000

1% of taxable turnover above 335 000

500 001 - 750 000

1 650 + 2% of taxable turnover above 500 000

750 001 and above

6 650 + 3% of taxable turnover above 750 000

RESIDENCE BASIS OF TAXATION

Residents are taxed on their worldwide income, subject to certain exclusions. The general principle is that foreign taxes on foreign sourced income are allowed as a credit against South African tax payable. This is applicable to individuals, companies, close corporations, trusts and estates.

TAXATION OF CAPITAL GAINS

Capital gains on the disposal of assets are included in taxable income.

Maximum effective rate of tax:

Individuals and special trusts                                    18%

Companies                                                                   22.4%

Other trusts                                                                 36%

 

•     most personal use assets

•     retirement benefits

•     payments in respect of original long-term insurance policies

•     annual exclusion of R40 000 capital gain or capital loss is granted to individuals and special trusts

•     small business exclusion of capital gains for individuals (at least 55 years of age) of R1.8 million when a small business with a market value not exceeding R10 million is disposed of

•     instead of the annual exclusion, the exclusion granted to individuals is R300 000 for the year of death.

DIVIDENDS TAX

Dividends Tax is a final tax at a rate of 20% on dividends paid by resident companies and by non-resident companies in respect of shares listed on the JSE. Dividends are tax exempt if the beneficial owner of the dividend is a South African company, retirement fund or other exempt person. Non-resident beneficial owners of dividends may benefit from reduced tax rates in limited circumstances. The tax is to be withheld by companies paying the taxable dividends or by regulated intermediaries in the case of dividends on listed shares. The tax on dividends in kind (other than in cash) is payable and is borne by the company that declares and pays the dividend.

OTHER WITHHOLDING TAXES

In certain cases the applicable tax rate may be reduced in terms of a tax treaty with the country of residence of a non-resident.

Royalties

A final tax at a rate of 15% is imposed on the gross amount of royalties from a South African source payable to non-residents.

Interest

A final tax at a rate of 15% is imposed on interest from a South African source payable to non-residents. Interest is exempt if payable by any sphere of the South African government, a bank or if the debt is listed on a recognised exchange.

Foreign entertainers and sportspersons

A final tax at the rate of 15% is imposed on gross amounts payable to non-residents for activities exercised by them in South Africa as entertainers or sportspersons.

Disposal of immovable property

A provisional tax is withheld on behalf of non-resident sellers of immovable property in South Africa to be set off against the normal tax liability of the non-residents. The tax to be withheld from payments to the non-residents is at a rate of 7.5% for a non-resident individual, 10% for a non­resident company and 15% for a non-resident trust that is selling the immovable property.

OTHER TAXES DUTIES AND LEVIES Value-Added Tax (VAT)

VAT is levied at the standard rate of 15% on the supply of goods and services by registered vendors. The tax rate was 14% until 31 March 2018.

A vendor making taxable supplies of more than R1 million per annum must register for VAT. A vendor making taxable supplies of more than R50 000 but not more than R1 million per annum may apply for voluntary registration. Certain supplies are subject to a zero rate or are exempt from VAT.

Transfer Duty

Transfer duty is payable at the following rates on transactions which are not subject to VAT -

 

Acquisition of property by all persons:

 

Value of property (R)

Rate

0 - 900 000

0%

900 001 - 1 250 000

3% of the value above R900 000

1 250 001 - 1 750 000

R10 500 + 6% of the value above R 1 250 000

1 750 001 - 2 250 000

R40 500 + 8% of the value above R 1 750 000

2 250 001 - 10 000 000

R80 500 +11% of the value above R2 250 000

10 000 001 and above

R933 000 + 13% of the value exceeding R10 000 000

Estate Duty

Estate duty is levied on property of residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million.

 

•     Donations tax is levied at a flat rate of 20% on the value of property donated. However, the amount of donations exceeding R30 million is taxed at a rate of 25%.

•     The first R100 000 of property donated in each year by an individual is exempt from donations tax.

•     In the case of a taxpayer who is not an individual, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total.

•     Dispositions between spouses and South African group companies and donations to certain public benefit organisations are exempt from donations tax.

Securities Transfer Tax

The tax is imposed at a rate of 0.25 of a per cent on the transfer of listed or unlisted securities. Securities consist of shares in companies or member's interests in close corporations.

Tax on International Air Travel

R190 per passenger departing on international flights excluding flights to Botswana, Lesotho, Namibia and Swaziland, in which case the tax is R100.

Skills Development Levy

A skills development levy is payable by employers at a rate of 1% of the total remuneration paid to employees. Employers paying annual remuneration of less than R500 000 are exempt from the payment of Skills Development Levies.

Unemployment Insurance Contributions

Unemployment insurance contributions are payable monthly by employers on the basis of a contribution of 1 % by employers and 1 % by employees, based on employees' remuneration below a certain amount.

 

Employers not registered for PAYE or SDL purposes must pay the contributions to the Unemployment Insurance Commissioner.

 

SARS INTEREST RATES

Rate of interest (from 1 August 2017)

Rate

Fringe benefits - interest free or low interest loan (official rate)

7.75% p.a.

Rates of interest (from 1 November 2017)

Rate

Late or underpayment of tax

10.25% p.a.

Refund of overpayment of provisional tax

6.25% p.a.

Refund of tax on successful appeal or where the appeal was conceded by SARS

10.25% p.a.

Refund after prescribed period or late payment of VAT

10.25% p.a.

Customs and Excise

10.25% p.a.

 

BUDGET Highlights

 

Value-Added Tax rate increases from 14% to 15% on 1 April 2018

 

Limited relief for the effect of inflation in adjusting Personal Income Tax rates resulting in additional tax of R6.8 billion

 

Estate Duty rate increases from 20% to 25% on dutiable amount of estates of more than R30 million

 

Donations Tax rate increases from 20% to 25% on donations of more than R30 million

 

Minister of Finance to approve six special economic zones for tax relief

General Fuel Levy increases by 22 cents per litre and Road Accident Fund levy increases by 30 cents per litre on 4 April 2018

 

Increased Excise Duties on tobacco and alcohol

 

Increased Environmental taxes on plastic bags, incandescent light bulbs and vehicle emissions tax, and the new health promotion levy on sugary beverages are effective from 1 April 2018

 

Last modified on Thursday, 22 February 2018 09:59
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