Taxation in South Africa

Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government.[2] Prior to 2001 the South African tax system was "source-based", wherein income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.[3][4]

South African national government budget breakdown for 2019/20.

Constituents of South African taxation receipts for the tax year 2018/19.[1]

  Personal income tax (38.3%)
  VAT (25.2%)
  Company income tax (16.6%)
  Fuel levy (5.9%)
  Dividends (2.3%)
  Customs duties (4.3%)
  Specific excise duties (3.2%)
  Other direct and indirect taxes (4.2%)

Central government revenues come primarily from income tax, value added tax (VAT) and corporation tax. Local government revenues come primarily from grants from central government funds and municipal rates. In the 2018/19 fiscal year SARS collected R 1 287.7 billion (equivalent to US$ 86.4 billion)[5] in tax revenue, a figure R71.2 billion (or 5.8%) more than that from the previous fiscal year.

In 2018/19 financial year, South Africa had a tax-to-GDP ratio of 26.2% that was only slightly more than the 25.9% in 2017/18. The cost of collecting tax revenue has remained somewhat constant; decreasing slightly from 0.93% of total revenue in 2016/17 to 0.89% in 2017/18,[2] while the 2018/19 financial year showed a further improvement in the cost of revenue collection, which dropped to 0.84%.[1]

Three of the provinces of South Africa contributed 77.8% of the total tax revenue: Gauteng (49.0%), Western Cape (15.5%), and KwaZulu-Natal (13.3%). The provinces with the smallest contributions were the Northern Cape (1.3%), followed by Free State (3.2%) and North West (3.3%) [1]