A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures. A failure to pay in a timely manner, along with evasion of or resistance to taxation, is punishable by law.
Taxes in South Africa: a guide to the South African tax system
Taxes in South Africa can be applicable to worldwide income. This South African tax guide explains the country’s tax system and rates, as well as how to file your South African tax return and pay VAT.
You must pay South African taxes if you work in South Africa or own a South African business. The amount you’ll pay depends on certain factors, such as whether you are a resident or non-resident.
This guide explains the various aspects of taxes in South Africa, including the following:
Federal taxes in South Africa
The South African government levies a series of direct taxes on citizens and companies operating in South Africa. These include income and business taxes, capital gains, and inheritance taxes.
Indirect taxes such as Value-Added Tax (VAT) and Fuel Duty also apply, as well as contributions towards social security in South Africa.
More information on who has to pay is available from the South African Revenue Service.
Taxes on goods and services in South Africa
VAT in South Africa is levied on the consumption of goods and services. The VAT rate in South Africa is currently 15% on most goods and services and on imported goods, though there are some exceptions, for example some financial services.
Businesses are responsible for paying VAT to the government but they can pass on this charge to their customers or clients by adding VAT to the cost of invoiced goods and services.
Businesses must register for VAT in South Africa if their annual turnover exceeds R1 million within a 12-month period.
Can you get a refund on VAT?
Tourists and diplomats visiting South Africa can claim a refund of the VAT they paid on goods purchased in the country. To qualify, you’ll need to be a non-resident foreign passport-holder or a South African passport-holder who is now a permanent resident of another country. You can reclaim VAT when leaving the country by declaring the goods in question to a customs official.
The South African government’s guide to VAT refunds for tourists offers further information on how to make a claim.
Who has to pay tax in South Africa?
You must pay taxes in South Africa if you:
Are a permanent or temporary resident of South Africa – if you have South African citizenship or a South African residence permit, you must pay taxes.
Lived in South Africa for more than 91 days in each of the last five tax years, and at least 915 days in total across those five years.
Are a homeowner in South Africa. All homeowners (even non-residents) must register with the SARS in the event they are liable to pay capital gains tax on property.
Earn more than R1.25 million in foreign employment income as a tax resident.
There are exemptions to these rules, for example, if you are elderly and/or make under a certain amount annually. However, if you qualify as a tax resident in South Africa, you must register as a taxpayer by visiting your local SARS branch to verify your identity, address, and bank details. You can finish the remainder of the process online.
South African tax system for foreigners
Foreign residents pay the same income tax in South Africa as local citizens. For expats relocating to South Africa, there are a number of countries that have tax treaties with South Africa, including Australia, Japan, Sweden, Thailand, the United Kingdom, and the United States, which can help you to avoid double taxation in your home country.
From 1 March 2025, foreign employment income earned by a tax resident in excess of R1.25 million will be taxed in South Africa according to the tax tables for that year. This applies to residents who spend more than 183 days, of which at least 60 days is continuous, outside of South Africa in any 12 month period during that year of assessment.
Pensions
There is no tax on international pensions in South Africa. Local pensions, though, pay tax at various rates depending on whether it is a lump-sum or an annuity. South Africa is part of the Automatic Exchange of Information (AEOI) system, a new global standard that aims to crack down on cross-border tax evasion.
Withholding tax on interest or royalties
These are two taxes apply on interest or royalties paid to or for the benefit of a foreign person outside South Africa. The South African tax rate for this is 15%. The foreign person is liable for the tax, but the person making the payment must withhold it. There are certain exemptions, however.
Filing US taxes from South Africa
Despite the fact that every US citizen and Green Card holder must file a tax return with the IRS even when living abroad, many expatriates still don’t.
Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from South Africa, see our guide to filing US taxes from abroad.
Income tax rates in South Africa
Earnings received from employment income, self-employed trade, rental income, investment income, and pension income are subject to income tax. Self-employed people pay income tax at the same levels as employees in South Africa.
These are South Africa’s income tax bands for the 2025 tax year (1 March 2025 to 28 February 2025):
| Taxable income (R) | Rates of tax (R) |
|---|---|
| Up to R205,900 | 18% of taxable income |
| R205,901–R321,600 | R37,062 + 26% of taxable income above R205,900 |
| R321,601–R445,100 | R67,144 + 31% of taxable income above R321,600 |
| R445,101–R584,200 | R105,429 + 36% of taxable income above R445,100 |
| R584,201–R744,800 | R155,505 + 39% of taxable income above R584,200 |
| R744,801–R1,577,300 | R218,139 + 41% of taxable income above R744,800 |
| R1,577,301 and above | R559,464 + 45% of taxable income above R1,577,300 |
Tax calculators
There are a number of online income tax calculators where you can work out how much you’ll need to pay, including those from:
- Old Mutual
- Sage
- South African Tax Guide
- TaxTim
How to file your income tax return in South Africa
Residents who pay taxes in South Africa have to fill in an annual tax return form and submit it to SARS. The South African tax year runs from 1 March to 28/29 February. The tax season, when people submit their tax return forms, is from July to November depending on the filing method. Individuals and business taxpayers are required to make the necessary payments along with their South African tax returns.
This will be any amount owed that hasn’t been paid through the Pay-as-You-Earn (PAYE) system, where tax contributions are automatically deducted from your wages. If you have to pay more in tax, payments can be made to SARS using any of the following methods:
- at a bank
- via a SARS eFiling
- via an electronic funds transfer
Keep in mind that not filing your tax return can result in a penalty ranging from R250 to R16,000 for each month that you don’t comply. Furthermore, a new law in 2025 has made tax negligence a potential criminal offense carrying a prison sentence of up to two years.
Withholding Tax on Service Fees Update
The 2013 draft Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill discussed in the previous VAT/e-commerce alert on South Africa also included detail on the proposal to introduce a 15% withholding tax on cross-border service fees announced in Budget 2013.
Under the proposal, new sections dealing with the withholding tax on service fees would be inserted into SRA’s income tax act as follows:
- South Africa would levy a 15% withholding tax on service fees paid by any person to or for the benefit of any foreign person, to the extent the fees are regarded as having been derived from a South African source.
- A ‘foreign person’ means any person that is not a resident; and ‘service fees’ means any amount that is received or accrued in respect of technical services, managerial services and consultancy services but does not include services incidental to the imparting of or the undertaking to impart any scientific, technical, industrial or commercial knowledge or information, or the rendering of or the undertaking to render any assistance or service in connection with the application or utilization of such knowledge or information.
- Exemptions:
(1) A foreign person is exempt from the withholding tax on service fees if
(a) that foreign person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the service fee is paid;
(b) the service in respect of which that service fee is paid is effectively connected with a permanent establishment of that foreign person in the Republic if that foreign person is registered as a taxpayer in terms of Chapter3 of the Tax Administration Act
or
(c) that service fee constitutes remuneration paid by an employer to an employee.
- Generally, service fees would be considered to be from a South African source if the activity that gave rise to the fees (the work that was required to earn the fees) was physically performed in South Africa.
- The withholding tax would not apply when the service fees are effectively connected to a recipient’s South African permanent establishment. The tax, therefore, would be a final tax for non-residents who ordinarily would not be subject to the normal South African income tax on service fees.
The draft Bill pushed the proposed effective date to January 1, 2025, instead of March 1, 2014 as originally announced.
Taxpayers earning fees from South Africa should consider whether their activities come under the ambit of these changes. Please contact Dafydd Williams with questions.
What is exempt from tax in South Africa?
Exempt income
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.
How are businesses taxed in South Africa?
The corporate tax rate in South Africa is a flat rate of 28% for all companies (27% from 1 April 2025). Additionally, companies are subject to capital gains tax at a rate of 22.4%. Trusts pay a capital gains tax of 36%, while special trusts and individuals are liable for a rate of 18%.
Do small businesses pay tax in South Africa?
Qualifying businesses will declare and pay one (1) tax (unless with a VAT or PAYE option) and only start paying tax when their annual turnover exceeds R335 000. A small business that is registered for Turnover Tax can choose to register for VAT as well.
How do taxes work for small business owners in South Africa ?
Small businesses with one owner pay a 13.3 percent tax rate on average and ones with more than one owner pay 23.6 percent on average. Small business corporations (known as “small S corporations”) pay an average of 26.9 percent. Corporations have a higher tax rate on average because they earn more income.
Do small businesses pay taxes on revenue or profit in South Africa ?
A corporate or business tax is charged on the profits of a company. The figure used as a basis for taxes varies, depending on the business type. Small business owners pay tax on Schedule C as part of their personal tax return. Partners in partnerships and LLC owners are taxed on their share of business net income.