Corporate taxes in South Africa are payable by all registered businesses in the country to the South Africa Revenue Services (SARS). It is the responsibility of businesses based in South Africa to ensure that they pay taxes at the rates stipulated based on their worldwide income.
Companies that are based outside South Africa but operate in the country or have a branch in South Africa are under obligation to pay taxes based on taxes that they derive from South Africa only.
Below is the list of companies that are expected to remit corporate taxes in South Africa:
- Listed and unlisted corporate companies
- Private companies
- Close corporations
- Collective investment schemes
- Small business corporations
- Share block companies
- Body corporates
- Public benefit companies
- Dormant companies
Types of Corporate Taxes
The first type of tax is turnover tax which is an alternate method of business tax in South Africa The rates of turnover tax are progressive, ranging from zero tax paid on annual turnover below R335, 000 up to a payment of R6, 650 on turnover above R750, 000 plus 3% of any amount above R750, 000. Its annual turnover is R1, 000,000 or less.
The second type of tax is dividend tax which is imposed on dividends payments on shareholders at a rate of 15%. It is normally levied on the payee but withheld by the company making the payment and therefore if a company has shareholders who receive dividends payments, it is the responsibility of the company to deduct tax from the payment of the dividends and submit it to SARS.
Then we have the skills development levy (SDL) which is payable by employers to promote the learning and development of their employees with South Africa. Employers are liable for SDL if their total annual salary bill is more than R500, 000 and it is normally charged to employers at a rate of 1% of the total salary bill.
For those who own small businesses, they have a variety of options depending on how you want to run it the business. The business can be registered as a sole trader, as a company or as a micro business and the tax rates are as follows
- No tax on the annual income of less than R75,000
- 7% tax on income between R75,001 and R365,000
- 21% tax on income between R365,001 and R550,000
- 28% tax on income above R550,000
Gold mining and long term insurance companies are taxed based on a standard formula, and life insurance funds are taxed at rates of between zero and 30% depending on the fund type.
Non-profit and public benefit organizations are exempted from paying corporate tax.
In conclusion, the corporate tax rate in South Africa is a flat rate of 28% for all companies. This is slightly above the average corporate tax rate for Africa overall, which is 27.46%, and above the global average of 23.62%. Trusts are also supposed to remit a whopping 41% pay tax at a separate rate.
Annual tax returns are supposed to be submitted between July and November for the previous tax year, and they are supposed to be two provisional returns, one for the first half of the year and the second by the end of the year. Lastly, all companies are supposed to remit their taxes via the provisional tax system.