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

How Is Bonus Tax Calculated In South Africa

How Is Bonus Tax Calculated In South Africa

How Is Bonus Tax Calculated In South Africa. Our aim is to illuminate the complexities of this system and provide clarity regarding the role of SARS.

What Is Reconciliation to Taxable Income?

What Is Reconciliation to Taxable Income?

In this blog post, our focus will be on taxable income. We will give you insight on reconciliation to taxable income

How the SARS Income TAX Brackets Work

How the SARS Income TAX Brackets Work

This guide is meant to give you the information you need to understand and navigate the tax brackets set by SARS in South Africa easily

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.

What Is Income Tax Return Online Rectification

What Is Income Tax Return Online Rectification

In this article, you'll explore income tax return online rectification in South Africa: duration, status check, requirements, and the process when requesting correction from SARS.

How to Calculate Capital Gains Tax In South Africa

How to Calculate Capital Gains Tax In South Africa

How to Calculate Capital Gains Tax In South Africa. But don't fret; we're here to illuminate the art of calculating CGT in this vibrant nation.

Difference Between Tax Rebate and Tax Threshold?

Difference Between Tax Rebate and Tax Threshold?

Difference Between Tax Rebate and Tax Threshold? This article explains different concepts you should know about filing tax returns. 

Tax on Winnings of Game Shows And Lottery

Tax on Winnings of Game Shows And Lottery

We’ll delve into how much tax is slapped on lottery winnings, whether online gambling platforms like Betway are taxable

What Does a Tax Attorney Do?

What Does a Tax Attorney Do?

This guide explains everything you want to know about the role of the tax attorney, career path, and potential earnings

What Are the Consequences of Not Paying Tax?

What Are the Consequences of Not Paying Tax?

What Are the Consequences of Not Paying Tax? Read on to learn the consequences of not paying taxes to the government.    

What Is the Securities Transfer Tax (STT) in South Africa?

What Is the Securities Transfer Tax (STT) in South Africa?

Today we will be exploring one of these- the Securities Transfer Tax, or STT. If you regularly interact with financial markets or investments, this is one you should properly understand.

Must-Know Income Tax Penalties In South Africa

Must-Know Income Tax Penalties In South Africa

Today we’re looking at some of the most common income tax penalties in South Africa, as well as how you can avoid triggering them and save yourself some cash.

What Are the Liabilities on a Tax Return?

What Are the Liabilities on a Tax Return?

Today we look at exactly what that ‘liabilities’ section means for you, what belongs there, and how to correctly assess and create your balance sheet for income tax purposes.

Penalty On Non-Payment Of Advance Tax In South Africa

Penalty On Non-Payment Of Advance Tax In South Africa

This article explains the fines and interest, the penalty code, the late and self-assessment tax penalty, and how to see and pay your SARS penalty.

Why Your Tax Refund Might Be Delayed

Why Your Tax Refund Might Be Delayed

Today, we will be looking at this issue in more depth and how to give your income tax refund the best possible chance of being processed quickly.