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Information on Company Tax South Africa |
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Setting up a business in South Africa – Company Tax
When it comes to tax, there is quite a bit of reporting that needs to be done to the South African Revenue Services (SARS). These taxes & levies include:
- Income Tax – reporting once a year ending February
- Value Added Tax (VAT) – Reporting every 2 months
- Pay-as-you-earn (PAYE) – Reporting every month
- Unemployment Insurance Fund (UIF) – Collected by SARS once a month
- Skills Development Levy (SDL) – Collected by SARS once a month
It is quite important to do the reporting on time, since SARS will charge penalties and interest. Good advice here would be to seek help from an accountant, if you are not sure on the submissions – money you will find is well worth spending.
For Close Corporations, annual financial statements need to be checked and signed off by a professional accountant (Accounting Officer), while companies need to engage an auditor and have their financial statements audited.
The tax year in South Africa ends on the last day of February.
Please find below more information on the calculation of income tax for companies in South Africa:
According to the Income Tax Act, a company includes:
- a close corporation.
- any association, corporation or company incorporated in South Africa (registered as a company).
- any association, corporation or company established under any South African law.
- any association, corporation or company incorporated under the law of another country.
- Any co-operative.
An entity is incorporated when it is entered in a register and given juristic personality (in terms of the country) so that it exists as a legal entity part from its member or owners.
Calculation of a company’s tax liabilities:
Companies pay normal income tax (usually at 28%) on their taxable income, and secondary tax of 10%.
The taxable income of a company is calculated in the same way as an individual’s taxable income. There are certain provisions of the Act which apply only to companies however, and certain provisions which apply only to individuals. With some exceptions, normal tax is calculated at a flat rate of 28% of a company’s taxable income.
In additional to normal tax, companies are also liable for a tax called secondary tax on companies (STC) which is a tax of 10% on net dividends distributed. The effective tax rate for companies is therefore a combination of normal tax and STC and is variable depending on the amount of dividends declared. A company is not entitled to any rebates other than rebate in respect of foreign tax not covered by a double tax treaty.
Rates of Normal tax 2008
| Type of company |
Rate |
| Normal companies |
28% |
Small business corporation
- First R 43000 of taxable income
- Excess above R 43 000 to 300 000
- Excess of R 300 000 |
0%
10%
29% |
| Employment company |
34% |
| Gold Mining company not subject to STC |
37% of non gold mining taxable income
(the tax on gold mining income is determined in terms of a formula) |
Foreign company branch in South Africa
(not subject to STC) |
34% |
Long term insurer
- individual policyholder fund
- company policyholder fund
- corporate fund
- untaxed policyholder fund |
30%
29%
29%
0% |
| Oil and Gas company that is a resident |
29% |
| Oil and Gas company that is not a resident and caries on trade through branch or agency |
32% |
The above article was contributed by the Incompass Group. Incompass provides a one stop service for returning South Africans that are considering setting up their own business. They are able to assist with Company formation, business plans, due diligence, marketing strategies and tax structures.
Incompass can be contacted here.
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