Tag Archives: what is taxation

Taxation in South Africa

A tax is a financial charge or levy imposed upon a taxpayer who could be an individual or business entity by the state. The logic behind taxation by many governments is that paying tax is the way individuals and corporate organisations contribute towards the much needed social services like transport, education, health etc.

South Africa has a progressive income taxation system which is based on the premise that the wealthy should contribute a greater proportion towards supporting the state than the poor. This means the more a person earns the higher percentage of tax they pay. The semi autonomous government body charged with this responsibility is the South African Revenue Authority(SARS). There are different types of taxes some of which are;

Normal tax-This is a levy imposed on all persons in the form of an annual tax which is calculated by applying predetermined rates to a persons taxable income. This kind of tax is divided into individual income tax and company income tax.

Donations tax-this is the tax paid on transfer of wealth rather than on income but it differs from estate duty because it specifically taxes gifts and donations as opposed to inheritance.

Estate duty is duty charged on the death of a person and is based on the value of the deceased estate on the date of their death. It is 20% on the amount remaining in the deceased estate over R1.5 million.

Capital gains tax-this is a portion of the net gain added to the taxpayers taxable income from the increase in value of an asset that was disposed off for more than its base cost.

Value Added Tax-is a broad tax paid  by vendors on the supply of goods and services that is charged upon purchase. People who are not South African passport holders and are not resident in South Africa are eligible to claim back VAT on movable goods purchased in South Africa provided they present a tax invoice in form of a receipt for the goods.

Fuel Levy-This is the tax paid at the pump on fuel like petrol and diesel. 5% of the total fuel price paid at the pump in South Africa goes to the Road Accident Fund which is a state insurer that provides insurance cover to all drivers of motor vehicles in respect of liability incurred or damage cause as a result of traffic collision.

From the above tax categories, its clear to see that South Africa has broadened its tax base which has resulted in a broad pool of financial resources which are utilised to build and maintain a great South Africa.