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 tax payable and when they are required to file tax returns. Understanding the tax tables is important when you need to make certain financial decisions such as selling a property, donating, or investing.
How do I use the tax tables 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' — they can 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
Tax rates (year of assessment ending 28 February 2021) 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
Main member R319
First dependant R319
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 that 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 are the Rebates that apply 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:
The tax thresholds at which liability for normal tax commences 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 will 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. They 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 are the easiest to form. Private companies are mainly owner-run businesses. Close corporations are another type of entity that 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
Financial years ending on any date between 1 April 2020 and 31 March 2021TypeRates 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.
An entity may not be a personal service provider.
Small Business Corporations Tax Table
Tax rates (year of assessment ending 31 March 2021) Taxable IncomeRates 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.