As a tax resident of South Africa, you have certain responsibilities that are outlined in the South African Income Tax Act. In this article, we will explore what those responsibilities are and how they affect your tax obligations.
Declare your worldwide income
South African tax law is residency based. As a resident, you are required to declare your worldwide income to the South African Revenue Service (SARS) annually. Worldwide income includes income from offshore sources, including rental income, salaries from non-resident employers, and investment income.
In some countries, the income from their jurisdiction may already have been taxed. Therefore, to avoid double taxation, most countries have a mutual double tax agreement which states in which country the income will be taxed and at what rate. Furthermore, in the cases that the income is taxed in both countries, the South African Tax Act 58 of 1962 provides deductions or rebates of the tax already paid on the foreign income taxed in South Africa.
Tax year and important dates
It is important to pay your taxes on time to avoid penalties and interest charges. The tax year in South Africa runs from the beginning of March to the end of February. The deadline for submitting your tax return is a predefined date in October. Paying this tax is specified on the assessment upon completion, usually a month after submission.
If you are a provisional taxpayer, this October deadline is extended to January.
When you do not have to submit a tax return
You are not required to submit a tax return when you earn an annual income of less than R500,000 a year from a single South African employer who has deducted employee’s tax, do not have any benefits like Travel Allowance, and do not have medical or pension contributions. A Tax Consultant can guide you when submitting a tax return.
Provisional Taxpayer
You will be required to register as a Provisional Taxpayer if you earn income from a source that does not deduct employee’s tax, earn income from multiple sources, earn income that is not considered remuneration like rental or income from a trade, or when you are a director of a company.
Even if these examples don’t apply, the Commissioner can notify you that you be registered as a Provisional Taxpayer. You should always speak to a Tax Consultant to assess if you should be registered as a Provisional Taxpayer.
As a provisional taxpayer, you must make an estimate of your expected total tax and pay a portion in advance at the end of August and February of each year. These advance payments are then deducted when the final assessment is issued upon receipt of your annual tax submission.
Claim deductions and credits
As a tax, you are entitled to certain tax deductions and credits that can help to reduce your tax liability. Examples include contributions to Medical Aid and Retirement funds along with a wide range of expenses necessary to earn your income. Consequently, keeping accurate records of your expenses and claiming only legitimate deductions and credits is crucial as SARS may request supporting documentation to verify your claims. A Tax Consultant can assist you to identify and claim relevant deductions and credits.
Comply with tax laws
As a resident, you are required to comply with all South African tax laws. This includes registering for tax if you are required to do so, submitting your tax return on time, and paying your taxes on time.
If you fail to comply with tax laws, SARS may impose penalties and interest charges on any tax owing and late submissions. In severe cases, SARS may take legal action against you, which could result in fines or even imprisonment.
These charges can accumulate quickly, so filing your tax return and paying your taxes on time is essential to avoid unnecessary costs.
A Tax Consultant can help you stay on top of your tax obligations.
Conclusion
In conclusion, residents of South Africa for tax purposes have certain responsibilities that are outlined in the Income Tax Act. These include declaring your worldwide income, paying your taxes on time, claiming deductions and credits, and complying with tax laws.
It’s important to understand these responsibilities and to fulfil them in order to avoid penalties and legal action by SARS
South African professional bodies maintain a high standard and enforce their members’ compliance. Therefore, ensuring your tax consultant belongs to a reputable institute is essential. Working with an accredited tax consultant will ensure that you are in good hands in meeting your tax obligations and avoiding unnecessary costs.
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Written by Ashley Davis: B Comm Entrepreneurship (CA) SA