South Africa - Tax Guide for Freelance Contractors

Tax residents in South Africa:          are liable to pay South African tax on their worldwide                                                                income, 
Non tax residents in South Africa:   are liable to pay tax on South African-source income.

Individuals will be regarded as tax residents:

• if present in South Africa for more than 91 days in the relevant tax year and each of the five preceding years,
• if present for more than 915 days in the aggregate in the preceding five tax years,
• an individual is also resident if “ordinarily resident”, i.e. if the person’s settled home or main residence is in South Africa.

Married persons are taxed separately and must submit separate tax returns.

Taxable income includes:

• all cash amounts received for services rendered,
• the cash value of fringe benefits for which there is a schedule of valuations.

Certain deductions are permissible for 2009/2010 including:

• expenses incurred in the production of income like business-related travel, car and entertainment expenses,
• contributions to pension funds registered in South Africa,
• donations to approved public benefit organizations involved in education and AIDS-related activities (there are maximum limits),
• maximum deduction of ZAR   625 for medical scheme contributions for each of the first two beneficiaries and ZAR  380  for each additional beneficiary.

Contributions exceeding the capped tax-free amount and any other medical expenses may be claimed as a deduction to the extent that this exceeds 7.5% of the taxable income.

Due to some administrative difficulties for employers and the South African Revenue Service (SARS), it is proposed that the medical scheme contributions deduction and the deduction for other medical expenses be replaced by a non-refundable tax credit. This tax credit will be set at about 30% of the prevailing deductions in order to neutralise the tax effect. Initially, all contributions paid by the employer will be regarded as fully taxable, and the employee will be entitled to claim a tax deduction for contributions up to the tax-free capped amount.

Tax credits (rebates) for 2009/2010:

• ZAR 9’756  personal allowance for all taxpayers (primary rebate),
• ZAR 5’400 additional personal allowance for taxpayers over 65 years (secondary rebate).

Income tax rates for 2009/2010:

•  0.00% on income up to ZAR 54’200 if the taxpayer is under 65 years old,
•  0.00% on income up to ZAR 84’200 if the taxpayer is 65 years old or more,
• 18.00% on income from ZAR 54’200 or ZAR 84’200 to ZAR 132’000,
• 25.00% on income from ZAR 132’001 up to ZAR 210’000,
• 30.00% on income from ZAR 210’001 up to ZAR 290’000,
• 35.00% on income from ZAR 290’001 up to ZAR 410’000,
• 38.00% on income from ZAR 410’001 up to ZAR 525’000,
• 40.00% on income above ZAR 525’000.

Filing dates:

Tax returns can be filed manually or by e-mail and filing dates can vary each year depending on the way you decide to file your tax return. If tax returns for 2008/2009 are filed manually, the deadline lies between 1 July and 18 September 2009. If filed by e-mail, the deadline may be up to 30 November 2009.