TAX RATES (TAX YEAR ENDING 28 FEBRUARY 2019)
Individuals and special trusts
Retirement fund lump sum withdrawal benefits
Retirement fund lump sum benefits or severance benefits
Retirement fund contributions
- Amounts contributed to pension, provident and retirement annuity funds during a tax year are deductible by members of those funds
- The deduction is limited to 27.5% of the greater of remuneration for PAYE purposes or taxable income (both excluding retirement fund lump sums and severance benefits)
- The deduction is further limited to the lower of R350 000 or 27.5% of taxable income
- Amounts contributed by employers are taxed as fringe benefits
- Amounts contributed by employers and taxed as a fringe benefit are deemed to be contributions by the individual employee;
- Any contributions exceeding the limitations are carried forward to the next tax year and are deemed to be contributed in that following year. The amounts carried forward are reduced by contributions set off when determining taxable retirement fund lump sums or retirement annuities.
Medical tax credit
In determining tax payable, individuals are allowed to deduct medical scheme fees tax credit of:
- R310 each for the individual who paid the contributions and the first dependent on the medical scheme; and
- R209 for each additional dependent.
In determining tax payable, individuals are allowed to deduct:
- in the case of an individual who is 65 and older, or if an individual, his or her spouse, or his or her child is a person with a disability, 33.3% of the sum of qualifying medical expenses paid and borne by the individual; and an amount by which medical scheme contributions paid by the individual exceed three times the medical scheme fees tax credits for the tax year; or
- any other individual, 25% of an amount equal to the sum of qualifying medical expenses paid and borne by the individual, and an amount by which medical scheme contributions paid by the individual exceed four times the medical scheme fees tax credits for the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).
Deductions in respect of donations to certain public benefit organisations are limited to
- 10% of taxable income on assessment (excluding retirement fund lump sums and severance benefits). The amount of donations exceeding 10% of the taxable income is treated as a donation to qualifying public benefit organisations in the following tax year.
- 5% is allowed in the payroll – the benefit calculated by applying a prescribed formula.
Subsistence Allowances and Advances
Where the recipient is obliged to spend at least one night away from his or her usual place of residence on business and the accommodation to which that allowance or advance relates is in the Republic of South Africa and the allowance or advance is granted to pay for—
- Meals and incidental costs, an amount of R416 per day is deemed to have been expended
- Incidental costs only, an amount of R128 for each day which falls within the period is deemed to have been expended.
Where the accommodation to which that allowance or advance relates is outside the Republic of South Africa, a specific amount per country is deemed to have been expended.
Details of these amounts are published on the SARS website under Legal & Policy / Secondary Legislation / Income Tax Notices / 2018.
Rates per kilometre, which may be used in determining the allowable deduction for business travel against an allowance or advance where actual costs are not claimed, are determined by using the following table:
- 80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE.
- The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
- No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is covered by a maintenance plan).
- The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.
The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance.
AA Rate per kilometer
Where the distance travelled for business purposes does not exceed 12 000 kilometres per annum, no tax is payable on an allowance paid by an employer to an employee up to the rate of R3.61 cents per kilometre, regardless of the value of the vehicle.
However, this alternative is not available if other compensation in the form of an allowance or reimbursement (other than for parking or toll fees) is received from the employer in respect of the vehicle.
The taxable value is 3.5% of the determined value (the cash cost including VAT) per month of each vehicle.
Where the vehicle is–
- The subject of a maintenance plan when the employer acquired the vehicle the taxable value is 25% of the determined value; or
- Acquired by the employer under an operating lease the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel
80% of the fringe benefit must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.
On assessment the fringe benefit for the tax year is reduced by the ratio of the distance travelled for business purposes substantiated by a log book divided by the actual distance travelled during the tax year.
A further relief is available on assessment for the cost of license, insurance, maintenance and fuel for private travel if the full cost thereof has been borne by the employee and if the distance travelled for private purposes is substantiated by a log book.
Interest-free or low-interest loans
The difference between interest charged at the official rate (currently 6.75% as at July 2017) and the actual amount of interest charged is to be included in gross income.
The value of the fringe benefit to be included in gross income is the lower of the benefit calculated by applying a prescribed formula or the cost to the employer if the employer does not have full ownership of the accommodation. The formula will apply if the accommodation is owned by the employee, but it does not apply to holiday accommodation hired by the employer from non-associated Institutions.
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is withheld by the entities paying the dividends to the individuals.
Most foreign dividends received by individuals from foreign companies (shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%. No deductions are allowed for expenditure to produce foreign dividends.
- Interest from a South African source earned by any natural person under 65 years of age, up to R23 800 per annum, and persons 65 and older, up to R34 500 per annum, is exempt from taxation
- Interest is exempt where earned by non-residents who are physically absent from South Africa for at least 182 days (or 183 days in a leap year) during the 12 month period before the interest accrues and the debt from which the interest arises is not effectively connected to a fixed place of business in South Africa of that non-resident.
Other than the deductions set out above an individual may only claim deductions against employment income or allowances in limited specified situations, e.g. bad debt in respect of salary.
SARS Interest Rates
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