Tax Types: Employees Tax and Capital Gains Tax (CGT)

Employees Tax

Governed by the 4th Schedule of the Income Tax (IT) Act.
Employers must deduct/withhold employees' tax (PAYE) from remuneration.
Employers must register with SARS to obtain applicable tax tables for accurate deductions.
PAYE is paid monthly to SARS by the 7th of the following month.
- Late payments incur a penalty of 10% of the outstanding amount plus interest.
Employers must provide employees with an IRP(5) certificate showing remuneration and IT deducted.
Fringe benefits: Non-monetary taxable benefits where full tax hasn't been deducted require a separate certificate detailing the cash equivalent and its value.
At year-end (February, reconciled by May), employers reconcile IT deducted and remuneration for each employee and submit to SARS.
Employees required to submit tax returns do so electronically via e-filing, including all certificates and supporting documents.
If electronic submission is not possible, physical submission to a SARS office is required.
Taxpayers must register on the SARS e-filing site to obtain an income tax reference number.
If assessed IT is more than the tax credit (PAYE and other IT paid), the taxpayer must pay the difference within a specified period (interest-free).
Overpayments result in a refund to the taxpayer's bank account, unless the amount is under R 50, in which case it's deemed correct.

Technically not subject to Employees Tax deduction.
However, the definition of 'remuneration' may lead to at least 25% IT deduction, even for independent contractors and company directors.

Definition is broad, encompassing any income paid or payable:
- Salary, leave pay, wage, overtime, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance, or stipend.
- Whether in cash or otherwise, and whether or not paid for services rendered.
Includes annuity amounts and voluntary awards for services rendered or to be rendered (excluding travelling/subsistence allowances) under §8(1).
Also includes voluntary awards for relinquishment, termination, loss, repudiation, cancellation, or variation in any office held or employment, excluding lump sums from pension, provident, or retirement funds.
Gross income includes income from a relation, particularly dependents (minor children, nominees, or deceased persons) or transfers from public/private sector provident funds.

Determined by the 7th Schedule of the IT Act (Fringe Benefits).
Any 'allowance' granted, to the extent not expended on travelling or subsistence for business purposes, is included in Taxable Income (TI).
Excludes 'reimbursive allowances' where taxpayers claim funds back from employers for private monies spent on business travel or other items.
Since March 2011, if at least 80% of a motor vehicle's use is for business, only 20% of the benefit's value is included in TI.
100% of amount paid/granted in §8(1)(b)(iii) exceeding the calculated rate/km is included in remuneration (travel).
Any gain under §8B (from share disposal) acquired via a BBE share plan is included in income.
Any gain under §8C (mostly share related), in employee or directors’ hands, through a right obtained, may have a gain/loss to be included or deducted from income IF acquired via employment, holding office or company director.

Old age pensions, disability grants, supplementary allowances under Disability Grants (including child grants), and UIF payments.
Amounts payable to non-residents or independent contractors and NOT as an employee.
Amount paid/payable for reimbursive expenditure actually incurred.
Annuities from divorce settlements/judicial separation agreements.
Amounts paid/payable for services rendered in the course of trade carried on independently of the person paying.
Considered an Independent Contractor if employing 3 or more staff on a full-time basis, provided not a 'connected person' as defined.

Employee tax from all allowances paid/payable to employees by employers is included in 'remuneration' in the 4th Schedule.
'Cash equivalent' under the 7th Schedule (fringe benefits) is included in 'gross income' and therefore in remuneration, subject to employee taxation.
If a fringe benefit falls within 'exemptions' as defined, it's excluded from 'remuneration' and not subject to employee tax.
Common fringe benefits include:
- Acquisition of assets by employee for less than actual value.
- Contribution to medical aid scheme.
- Medical aid costs of employees or relatives incurred by employer.
- Benefits granted to relatives of employees and others.
- Bursaries and scholarships, Share incentive schemes, Uniforms & allowances, Transfer costs.
- Directors’ fees, rights to acquire shares, annuities, labour brokers etc.

Introduced in October 2001 to prevent income from being converted into tax-free capital gains and to enhance the equity of the tax system.
Functions as a backstop to personal and corporate income tax.
Brings South Africa in line with international practices.
Governed by the 8th Schedule of the IT Act, read together with §26A of the IT Act.
*Tax payers taxed at their marginal rate: R 644 489 + 45\%
Taxable income includes capital gains at the marginal rate as per §26A of IT Act.
Capital gains are paid with regular income tax, but both capital gains and losses are excluded from provisional tax computations.
An assessed capital loss cannot be set off against taxable income or increase an assessed loss.
An assessed capital loss is 'ring-fenced' but can be carried forward to offset future capital gains.
A taxable capital gain reduces an assessed loss.