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Tax Tables 2020-2021
For South Africa
What are the tax tables?
A tax table is a chart that displays the amount of tax due based on income received. The tax rate in the relevant tables may be shown as an amount, a percentage rate, or a combination of both. Tax tables are used by individuals, companies, small business corporations and trusts for both standard income and capital gains in South Africa.
Why do I need to know about the tax tables?
Understanding Tax Tables are crucially important for individuals and businesses alike as they need to be aware of the amount of taxes payable and when they are required to file tax returns. Understanding the tax tables are important when you need to make certain financial decisions such as selling a property, donating, or investing.
Tax Brackets 2020- 2021
How do I use the tax brackets for my small business correctly?
Depending on whether you are operating as a Sole Proprietor, a Company / Close Corporation or a qualifying Small Business Corporation or a Trust; you would need to look at different tax brackets:
- Sole Proprietors are taxed according to the individual tax brackets.
- Small Business Corporations are taxed according to the Small Business Corporations tax brackets.
- Companies and Close Corporations are taxed at 28% and Trusts are taxed at 45%. These tax rates must be used on your final taxable income after deductions. These different tax rates are covered below in more detail:
The Sole Proprietor
A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole trader does not necessarily work 'alone' — it is possible for the sole trader to employ other people. With this the sole trader would receive all the profits and that is his or her income. All assets and debt are owned by the sole trader. The sole trader may use a trading name for their business. As a sole trader, you are taxed using the individual tax rates table below, which are sliding scales based on your taxable income.
Income Tax Table: Individuals and Trusts
|Taxable Income||Rates of tax|
|1 – 205 900||18% of taxable income|
|205 901 – 321 600||37 062 + 26% of taxable income above 205 900|
|321 601 – 445 100||67 144 + 31% of taxable income above 321 600|
|445 101 – 584 200||105 429 + 36% of taxable income above 445 100|
|584 201 – 744 800||155 505 + 39% of taxable income above 584 200|
|744 801 – 1 577 300||218 139 + 41% of taxable income above 744 800|
|1 577 301 and above||559 464 + 45% of taxable income above 1 577 300|
As you can see, the higher your taxable income, the more tax you would pay. Your taxable income is your profit from your business less any taxable deductions that you have which are awarded to you as a Sole Trader. The deductions that you can utilise are Retirement Annuities, Donations to a Public Benefit Organisation (PBO) and Medical Expenses. These deductions are all calculated differently with different limitations.
Pension, Provident and Retirement Annuity Fund Contributions
Contributions to a pension, provident or retirement annuity fund during a tax year are deductible by the member of the fund. The deduction is limited to the greater of:
- 27.5% of the employee’s remuneration for PAYE purposes (excluding retirement fund lump sums and severance benefits); or
- 27.5% of the employee’s taxable income (excluding retirement fund lump sums and severance benefits).
The deduction is limited to a maximum amount of R 350 000.
If contributions exceed the limitation during a particular tax year, the contributions are carried over to the next tax year.
Medical Aid Tax Credits
|Each additional dependant||R215|
With Medical Aid Tax Credits, if you are a member of a Medical Aid in South Africa, you as the main member with receive a monthly rebate of R 319, if you have a dependent you would receive an additional R 319 per month and for any additional dependents, you would receive R 215 per month for each additional dependent. There is also a formula which is used to determine an additional tax credit when you have expenses that your medical aid did not pay for.
Once you have come to your final taxable income, you would then need to work out your taxes payable. Before you calculate that, you receive a rebate depending on your age. Below is the Rebates that are applicable to individuals/Sole Traders.
|Primary Rebate||R14 958|
|Secondary (Persons 65 and older)||R8 199|
|Tertiary (Persons 75 and older)||R2 736|
In some instances, where your taxable income is below a certain level according to your age group, you will not pay any taxes. These are the thresholds below:
|Persons under 65||R83 100|
|Persons of 65 - 74 years||R128 650|
|Age 75 and older||R143 850|
If you are a Sole Trader, you would need to pay provisional taxes which are filed twice every year to pay forward your estimated taxes. If you do not do this, you will incur penalties and interest on your under-declaration of your income.
Companies and Close Corporations
A private company is seen as a legal person in South Africa. The are profit companies and non-profit companies which can be clubs, churches and other charitable organisations. Profit companies are the most commonly used entity type in South Africa and is the easiest to form. Private companies are mainly owner run businesses. Close corporations are another type of entity which was used previously which was very similar to companies, but they can no longer be registered. Profit Companies and Close Corporations are taxed at 28% of their net profits.
Income Tax Table: Companies
|Type||Rates of tax|
|Companies or Close Corporations||28% of taxable income|
You can also get a Small Business Corporation which is taxed differently. There are major tax benefits for companies that qualify as a Small Business Corporation. There are strict rules which need to be met before an entity can qualify as a Small Business Corporation.
- Must be a corporate entity (Close Corporation, Private Company or Personal Liability Company).
- All shareholders of the entity must all be natural persons.
- The entity may not have a turnover of more than R 20 million.
- Shareholders may not hold shares in other companies.
- Entity may not be a personal service provider.
Small Business Corporations Tax Table
|Taxable Income||Rates of tax|
|1 – 83 100||0% of taxable income|
|83 101 – 365 000||7% of taxable income above 83 100|
|365 001 – 550 000||19 733 + 21% of taxable income above 365 000|
|550 001 and above||58 583 + 28% of the amount above 550 000|
For companies, close corporations, personal liability companies and those which qualify as a Small Business Corporation, your Net Profit on which your tax is payable is your total taxable income (excluding any capital proceeds) less any qualify deductions and special allowances. Once you come to your Net Taxable Income, you will then pay your taxes based on that taxable income.
If you have a profit on your company, you can pay out Dividends and there are taxes payable on Dividends paid out as set out below. If you make a loss, your loss is carried forward to the next year and it can be used to reduce your Taxable Profit in the Tax Years to come.
Dividends received by individuals from South African companies are generally exempt from income tax, but dividends tax at a rate of 20% is however withheld. Dividends received by South African resident individuals from REITs (listed and regulated property-owning companies) are subject to income tax.
Watch the National Budget 2020 Speech Webcast to hear how tax changes could impact you.
What are the 2020 / 2021 tax rates for South Africa?
When does someone need to register as a provisional taxpayer?
Any person who receives income (or to whom income accrues) other than a salary, is a provisional taxpayer. Most salary earners are therefore non-provisional taxpayers if they have no other sources of income. It is important to note that receiving exempt income, such as interest, does not make you a provisional taxpayer. Registered Companies automatically fall into the provisional tax system.
What are the tax filing requirements?
Provisional Tax Returns (IRP6) must be calculated and filed, and paid twice a year. This must be done at the end of the first 6 months of the tax year and at the end of the financial year. A top up payment can be done within 6 months after the financial year end. Payments must be calculated based on estimated taxable income.
When must I file a tax return as a Company or Individual?
A registered company must submit a tax return (ITR14) every tax year, regardless of whether the company is dormant or not.
For an individual who earns normal employment income:
- Your total employment income / salary for the year (March 2020 to February 2021) before tax (gross income) was more than R500 000; or
- You received several income streams for the full year of assessment (March 2020 to February 2021) from more than one employer; or
- You have allowances or other income (e.g. interest or rental income); or
- You are claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension contributions made by your employer, travel).
If you are a sole proprietor, you must file an income tax return.
What are the tax tables?
A tax table is a chart that displays the amount of tax due based on income received. The tax rate in the relevant tables may be shown as an amount, a percentage rate, or a combination of both.
Who should use the tax tables?
Tax tables are used by individuals, companies, small business corporations and trusts for both standard income and capital gains in South Africa.
Why do I need to know about the tax tables?
Understanding Tax Tables are crucially important for individuals and businesses alike as they need to be aware of the amount of taxes payable and when they are required to file tax returns.