Taxable remuneration includes all cash amounts received for services rendered (including bonuses and allowances) as well as most benefits in kind (such as the use of assets and 'soft' loans). For non-residents, these amounts form a part of South African gross income if they are effectively connected to the person's employment in South Africa. There are no special concessions for short-term foreign employees, except under DTTs.
South African residents who receive employment income for performing their employment-related tasks in a foreign country are generally exempt from tax on this income, provided that they have, during any 12-month period, spent more than 183 days (including a continuous period of at least 60 days) outside South Africa. It is, however, proposed that (with effect for years of assessment commencing on or after 1 March 2020) this exemption will only apply to the first ZAR 1.25 million of employment income.
Equity instruments acquired by virtue of employment or office held as director, whether from the employer or an associated institution in relation to the employer, are subject to income tax on the difference between the market value of the equity instrument and the consideration paid by the employee or office holder on the date that the equity instrument 'vests'.
Generally, an equity instrument will 'vest' when there are no restrictions attached to the instrument that affect the full and unencumbered ownership of the instrument.
Self-employment income is derived from an unincorporated business, partnership, trade, or profession. Persons earning self-employment income could include partners in a partnership or persons earning commission or professional fees or income from independent services.
An amount received or accrued from self-employment will be taxable in South Africa. Non-residents will only be taxed on South African-sourced self-employment income.
The maximum effective tax rate on capital gains is 18%. 40% of net capital gains realised are taxed at the normal income tax rates. An individual is entitled to an annual exclusion of ZAR 40,000 in determining the net capital gain for a year (in the year that the taxpayer dies, this annual exclusion is increased to ZAR 300,000).
All foreign capital gains realised by a South African resident are included in the South African tax net. For a non-resident, only the gains from the disposal of South African immovable property, interests in ‘land rich’ companies and the property of a South African permanent establishment (PE) are included.
Any disposal of South African immovable property by a non-resident is subject to WHT. Where the seller is a non-South African resident individual, the rate of WHT is 7.5%. This is not a final tax but an advance against the seller's actual tax liability for the year. Where it is expected that the actual tax liability will be less than the WHT, SARS may allow the WHT to be reduced.
Where an individual who is resident in South Africa disposes of a primary residence, up to ZAR 2 million of the capital gain will be exempt from capital gains tax (CGT). If the property has previously been leased or used partly for purposes of trade, an apportionment of the exclusion will apply.
Dividends paid by South African resident companies (or by non-resident companies if the shares in respect of which the dividends are paid are listed on a South African exchange) to individual shareholders are generally subject to a 20% dividend withholding tax, regardless of residency of the shareholder. Most foreign dividends accrued to or received by South African residents are exempt from tax if the resident holds at least 10% of the equity shares and voting rights in the company. Most other foreign dividends are subject to tax at an effective rate of 20%.
Interest received by or accrued to an individual is taxable. However, an exemption applies to the first ZAR 23,800 of local interest income (ZAR 34,500 for taxpayers who are 65 years of age or older).
Non-resident individuals are exempt from income tax unless the individual is physically present in South Africa for more than 183 days in aggregate during the year preceding the date on which the interest accrues or the debt on which the interest arises is effectively connected to a PE in South Africa. This exemption aligns with the WHT on interest paid from a South African source to a non-resident, levied at a rate of 15%.
Rental income from fixed or movable property is included in taxable income subject to allowable expenses and losses being deductible against such income.
Exemptions from income exist for natural persons subject to meeting the specified requirements. Exemptions include (subject to limitations and conditions):
- remuneration of certain non-resident employees of foreign states employed in South Africa
- certain pensions received from sources outside South Africa by both residents and non-residents
- lump sum payments from qualifying life policies
- special uniform allowances received by an employee
- employment relocation allowances received by an employee
- foreign employment income received by resident employees (specific time periods applicable)
- bona fide scholarships and bursaries
- amounts of alimony received by a spouse under a judicial separation or divorce, and
- amounts received or accrued on tax free investments subsequent to the introduction thereof on 1 March 2015.