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Sep 10, 2012

Rental income tax is high


INDIVIDUAL TAXATION

Nonresidents are taxed only on their South African-sourced income. Married couples are assessed and charged as separate individuals. If the property is considered part of the conjugal estate, income is divided between husband and wife in equal portions.

The tax year is from 01 March of the current year to 28 February of the succeeding year. The tax year 2011-2012 is from 01 March 2011 up to 29 February 2012. The tax year 2012-2013 is from 01 March 2012 up to 28 February 2013.

INCOME TAX

Income realized by nonresidents is taxed at progressive rates. The following tax rates apply for the tax year March 2012 – February 2013.


2012-2013 INCOME TAX

TAXABLE INCOME, ZAR (US$) TAX RATE
Up to 160,000 (US$19,428) 18%
160,000 – 250,000 (US$30,357) 25% on band over US$19,428
250,000 – 346,000 (US$42,014) 30% on band over US$30,357
346,000 – 484,000 (US$58,771)

35% on band over US$42,014

484,000 – 617,000 (US$74,920) 38% on band over US$58,771
Over 617,000 (US$74,920) 40% on all income over US$74,920
Source: Global Property Guide

Residents are entitled to allowable deductions and rebates. For individuals below 65 years of age, the tax threshold is ZAR63,556 (US$7,717) while the tax rebate is ZAR11,440 (US$1,389). Tax threshold and tax rebates for individuals over 65 years of age but less than 75 years of age are set at ZAR99,056 (US$12,028) and ZAR17,830 (US$2,165),respectively. Tax threshold and tax rebates for individuals over 75 years of age are ZAR110,889 (US$13,465) and ZAR19,960 (US$2,424).

The following tax rates apply for the tax year March 2011 – February 2012.

2011-2012 INCOME TAX

TAXABLE INCOME, ZAR (US$) TAX RATE
Up to 150,000 (US$18,214) 18%
150,000 – 235,000 (US$28,535) 25% on band over US$18,214
235,000 – 325,000 (US$39,463) 30% on band over US$28,535
325,000 – 455,000 (US$55,249)

35% on band over US$39,463

455,000 – 580,000 (US$70,428) 38% on band over US$55,249
Over 580,000 (US$70,428) 40% on all income over US$70,428
Source: Global Property Guide

Nonresidents are entitled to allowable deductions and rebates as residents. For individuals below 65 years of age, the tax threshold is ZAR59,750 (US$7,416) while the tax rebate is ZAR10,755 (US$1,335). Tax threshold and tax rebates for individuals over 65 years of age but less than 75 years of age are set at ZAR93,150 (US$11,562) and ZAR16,767 (US$2,081),respectively. Tax threshold and tax rebates for individuals over 75 years of age are ZAR104,261 (US$12,941) and ZAR18,767 (US$2,329).

RENTAL INCOME
Rental income is taxed at progressive rates. Interest payments, insurance premiums, agentís commission, and maintenance costs are deducted from the rental income.

CAPITAL GAINS
South African homesNonresidents are liable to Capital Gains Tax (CGT) on the disposal of property in South Africa. CGT effective from 1 October 2001 is added to the taxable income, and is subject to the progressive income tax rates.

To compute the gain, acquisition costs, transfer costs, and property improvement costs are deducted from the selling price. A further allowable annual deduction of ZAR30,000 (US$3,643) for tax year 2012-2013 or ZAR20,000 (US$2,429) for tax year 2011-2012 is subtracted. The taxable gain is 33.30% of the resulting amount as of tax year 2012-2013.

The disposal of property is assumed on death or emigration, and triggers the payment of CGT.

PROPERTY TAXATION


INCOME TAX

Income and capital gains earned of companies are subject to corporate income tax at a flat rate of 28%. In calculating taxable income, income-generating expenses are deductible from the gross income.





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