TAXES AND DEDUCTIONS FOR THE 2021/22 TAX YEAR

INCOME TAX RATES FOR INDIVIDUALS AND SPECIAL TRUSTS*

benefit of disabled people and testamentary trusts established for the benefit of minor children. All other trusts pay income tax at a flat rate of 45%.

Deductions For Retirement Fund Contributions

Amounts contributed to pension, provident and retirement annuity (RA) funds are deductible by fund members. Amounts contributed by employers and taxed as fringe benefits are treated as contributions by the individual employee. 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 before the inclusion of a taxable capital gain. Any contributions that exceed the limits are carried forward to the next tax year and deemed to be contributed in that year. The amounts carried forward are reduced by contributions set off when determining taxable retirement fund lump sums or RAs.

Deductions For Medical And Disability Expenses

All taxpayers: If you contribute to a medical scheme, you are entitled to a tax rebate (referred to as a medical scheme contributions tax credit) of up to R331 each for the individual who paid the contributions and the first dependant on the medical scheme and up to R224 a month for each additional dependant.

Additional tax credit for taxpayers under 65 years: You are entitled to a tax credit of 25% of an amount equal to your qualifying medical expenses plus an amount by which your medical scheme contributions exceed four times the medical scheme contribution tax credit for the tax year, limited to the amount that exceeds 7.5% of taxable income (excluding severance or retirement fund lump sums).

Additional tax credit for taxpayers with a disability and/or with a disabled family member or taxpayers over 65 years: You are entitled to a tax credit of 33.3% of your qualifying medical expenses plus 33.3% of the amount by which your medical scheme contributions exceed three times the medical scheme contribution tax credit for the tax year.

Tax On Local And Foreign Dividends

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 individuals. Dividends received by resident individuals from real estate investment trusts (Reits) are subject to income tax. Non-residents in receipt of those dividends are subject only to dividends tax. Most foreign dividends received by individuals from foreign companies (a shareholding of less than 10% in the foreign company) are taxable at a maximum effective rate of 20%.

CALCULATE REAL AFTER-TAX RETURNS ON INTEREST-BEARING INVESTMENTS

CPI INFLATION RATE: 4.9% IN JUNE 2021

Provisional Tax

A provisional taxpayer is any person who earns income by way of remuneration from an unregistered employer income that is not remuneration or an allowance or an advance payable by his or her employer. You are exempt from the payment of provisional tax if you do not carry on any business and your taxable income:

• Will not exceed the tax threshold for the tax year; or

• From interest, dividends, foreign dividends and the rental of fixed property and remuneration from an unregistered employer will be R30 000 or less for the tax year.

Deceased estates are not provisional taxpayers.

Capital Gains Tax

INCLUSION RATES

• Individuals special trusts and individual policyholder funds: 40% • Other taxpayers: 80%

MAXIMUM EFFECTIVE RATES

• Individuals and special trusts: 18%

• Other trusts: 36% • Companies: 22.4%

SOME OF THE EXCLUSIONS

• R2 million gain/loss on disposal of primary residence

• Annual exclusion of R40 000 to individuals and special trusts

• R300 000 in the year of death (instead of the annual exclusion)

• Retirement benefits

• Most personal use assets

• Payments in respect of original long-term insurance policies

• R1.8 million for individuals (at least 55 years of age) when a small business with a market value that does not exceed R10 million is disposed of.

Estate Duty

Rate: 20% on the first R30m; 25% on estates above R30m. Amounts in an estate up to R3.5m are not taxed. For the second-dying spouse, amounts up to R7m less the exemption used by the first-dying spouse are not taxed.

TAX-FREE SAVINGS ACCOUNTS

No income tax on interest, dividends withholding tax or capital gains tax. Contributions are limited to R36 000 a year, up to R500 000 over your lifetime. Contributions that exceed the limits will be taxed at 40%.

Donations Tax

• Donations tax payable by the donor is levied at a rate of 20% on property donated with a value up to R30 million. The rate on property with a value of more than R30 million is 25%.

• The first R100 000 of property donated in each year to a natural person is exempt from donations tax.

The real rate of return on money you invest is affected not only by inflation, but also by the rate at which you are taxed. The lower the inflation rate, the better your real rate of interest is likely to be. To calculate your real return, first work out what your after-tax return will be and then subtract the inflation rate. The table provides the marginal tax brackets and the interest rates at which you will start to receive a real (after-tax) rate of return on your money if it is taxed at that rate. The calculations ignore the fact that in the 2020/21 tax year, the first R23 800 (R34 500 if you are over 65 years of age) you earn in interest is tax-free. Any interest you receive above the exempt amount is taxed at your marginal tax rate.

• Donations between spouses are exempt from donations tax.

• Tax deductions on donations to approved public benefit organisations are limited to 10% of taxable income before deducting medical expenses (excluding retirement fund lump sums and severance benefits).

RETIREMENT FUND LUMP-SUM WITHDRAWAL BENEFITS

LUMP SUM RATE OF TAX

R0 to R25 000 0% of taxable income

R25 001 to R660 000 18% of taxable income above R25 000

R660 001 to R990 000 R114 300 plus 27% of taxable income above R660 000 R990 001 and above R203 400 plus 36% of taxable income above R990 000

Retirement fund lump-sum withdrawal benefits consist of lump sums from a pension, pension preservation provident, provident preservation or retirement annuity fund on withdrawal (including assignment in terms of a divorce order).

The tax on a retirement fund lump-sum withdrawal benefit (X) is equal to:

• The tax determined by applying the tax table to the aggregate of lump sum X plus all other retirement fund lump-sum withdrawal benefits accruing from March 2009, all retirement fund lump-sum benefits accruing from October 2007 and all severance benefits accruing from March 2011; less

• The tax determined by applying the tax table to the aggregate of all retirement fund lump-sum withdrawal benefits accruing before lump-sum X from March 2009, all retirement fund lump-sum benefits accruing from October 2007 and all severance benefits accruing from March 2011.

RETIREMENT FUND LUMP-SUM BENEFITS OR SEVERANCE BENEFITS

LUMP

R0

R500 001 to R700 000 18% of taxable income above R500 000

R700 001 to R1 050 000 R36 000 plus 27% of taxable income above R700 000 R1 050 001 plus R130 500 plus 36% of taxable income above R1 050 000

Retirement fund lump-sum benefits consist of lump sums from a pension, pension preservation, provident, provident preservation or retirement annuity fund on death retirement or termination of employment due to attaining the age of 55 sickness accident injury incapacity redundancy or termination of the employer’s trade.

Severance benefits consist of lump sums from or by arrangement with an employer due to relinquishment, termination, loss, repudiation, cancellation or variation of a person’s office or employment.

Tax on a retirement fund lump-sum benefit or a severance benefit (Y) is equal to:

• The tax determined by applying the tax table to the aggregate of lump-sum or severance benefit Y plus all other retirement fund lump-sum benefits accruing from October 2007 and all retirement fund lump-sum withdrawal benefits accruing from March 2009 and all other severance benefits accruing from March 2011; less

• The tax determined by applying the tax table to the aggregate of all retirement fund lumpsum benefits accruing before lump-sum Y from October 2007 and all retirement fund lump-sum withdrawal benefits accruing from March 2009 and all severance benefits accruing before severance benefit Y from March 2011.

Transfer Duty Rates

Sars Interest Rates

RATES OF INTEREST FROM 1 AUGUST 2020:

Fringe benefits - interest-free or low-interest loan (official rate): 4.5% a year

RATES OF INTEREST FROM 1 NOVEMBER 2020:

Late or underpayment of tax: 7% a year

Refund of overpayment of provisional tax: 3% a year

Refund of tax on successful appeal or where the appeal was conceded by the South African Revenue Service: 7% a year

Refund of VAT or late payment of VAT: 7%

WHO DOES NOT HAVE TO SUBMIT A TAX RETURN?

You do not have to submit a return if: your total pre-tax earnings from one employer were less than R500 000 for the tax year, you have no other sources of income (for example rental or interest) and there are no deductions that you want to claim.

Travelling Allowances

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:

Note:

• 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 (for example 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 logbook are used to determine the costs that may be claimed against a travelling allowance.

Alternative simplified method:

Where an allowance or advance is based on the actual distance travelled by the employee for business purposes no tax is payable on an allowance by an employer to an employee up to the rate of 398 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.

FRINGE BENEFITS: EMPLOYER-OWNED VEHICLES

• The taxable value is 3.5% of the determined value (the cash value including VAT) a month of each vehicle. Where the vehicle is:

– The subject of a maintenance plan when the employer acquired the vehicle, the taxable value is 3.25% 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 purpose of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the vehicle for the tax year is 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 logbook) divided by the actual distance travelled during the tax year.

• On assessment further relief is available for the cost of the licence, insurance, maintenance and fuel for private travel if the employee has borne the full cost thereof and if the distance travelled for private purposes is substantiated by a logbook.

Subsistence Allowances And Advances

If you are obliged to spend at least one night away from your usual place of residence on business and you receive an allowance or advance for accommodation in South Africa, which is to pay for:

• Meals and incidental costs: R452 a day is deemed to have been spent; or

• Incidental costs only: R139for each day is deemed to have been spent. Where the allowance or advance is for accommodation outside South Africa, a specific amount per country is deemed to have been spent. Refer to www.sars.gov.za > Legal counsel > Secondary legislation > Income tax notices > 2018.

Turnover Tax For Micro Businesses

Financial years that end on any date between March 1 2021 and February 28 2022.