DOING BUSINESS IN SOUTH AFRICA

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.

 

Yes we tax in South Africa

 

Flash News

New tax reform: No specific information

New tax treaties:

  • Tax treaty between South Africa and Zimbabwe enters into force.
  • Protocol to tax treaty between South Africa and Turkey enters into force.

Local tax advisors

No specific information on the local tax advisors.

Useful links

Website Tax administration: Click here

Permanent Establishment

The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:

  • Dependent agent who habitually concludes contracts in the name of a non-resident company (except if the activity is limited to purchase of goods);
  • Fixed place of business, building site, construction, assembly or installation and any related supervisory activity.

Entities are considered to be resident for tax purposes in South Africa if they are incorporated in South Africa, or if their place of management & control is in South Africa.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 28%.

Non-taxable income includes the following:

  • Dividends received from qualifying participations
  • Certain capital gains deriving from qualifying participations

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption;
  • Interest in excess of arm’s length principle;

Carry forward: Yes indefinitely, but some restrictions may apply.

Carry back: No

Companies should submit the tax return annually within 6 months after the relevant tax year.

Whithholding Taxes (payment to foreign companies)

The local tax rates in South Africa are the following, subject to the provisions of an applicable double tax treaty, if any.

There is no WHT on the profits paid from a branch to its foreign head office.

The general rate of WHT on dividends is 15% of the gross amount.

The general rate of WHT on interest is 15%.

The general rate of WHT on Royalties is 15%.

The general rate of WHT on management fees is 0%.

The general rate of WHT on technical services is 0%.

Capital gains

No specific information

VAT

Standard VAT tax rate is 14%

Note: Minister of Finance annouced in his 2018 budget that the VAT rate will be increased from 14% to 15% with effect from 1st April 2018.

Zero-rated supplies include, subject to certain conditions:

  • exports of goods;
  • Certain basic foodstuffs;
  • International passenger transportation;
  • Supply of services rendered outside of the custom territory;

Exempt supplies include, subject to certain conditions:

  • Certain financial services;
  • Local passenger transportation;
  • Training and education;

Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.

In case where for a tax period, Input VAT exceeds Output VAT, certain non-resident companies (which are not required to register and incur South Africa-VAT in the course of their business activities in South Africa) may apply for a refund.

No other specific information of VAT in South Africa.

Miscellaneous

The general statute of limitation is 5 years starting at the end of the year in which the tax return had to be filed.

There is foreign exchange control in South Africa. Income and capital could be repatriated provided that relevant compliance and law regulations are fulfilled.

There are no thin capitalization rules in South Africa. However, transactions are subject to arm’s length principle.

 

 

 

Do not hesitate to share your experience in South Africa with us in the comments below. Any comments are welcome !

 

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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