Chapter 1:
Introduction
to
Taxation –
Summary
What is SARS?
The South African Revenue Service (SARS) is the government agency responsible for
collecting all taxes in South Africa. Think of them as the tax collectors who make sure
everyone pays what they owe.
Two Main Types of Taxes
1. Direct Taxes
Paid directly by people and businesses
Example: Income tax on your salary
2. Indirect Taxes
Paid on transactions/purchases
Example: VAT when you buy something
Major Taxes You Need to Know
Income Tax/Normal Tax
Personal: Tax on individuals' income (salary, investments)
Corporate: Tax on company profits
Uses sliding scales - the more you earn, the higher the rate
Capital Gains Tax
Tax when you sell assets (like property or shares) for a profit
40% of gain included in income for individuals
80% for companies
VAT (Value Added Tax)
14% tax on most goods and services
Some items are zero-rated (0%) or exempt
Withholding Taxes
Tax automatically deducted from payments
Employee Tax: Deducted from your salary
Provisional Tax: Paid in advance on investment income
Tax Rates Summary
Entity Type Tax Rate
Individuals Sliding scale (see tax tables)
Companies 28%
Small Business Corporations Special sliding scale
Trusts 45%
Micro Businesses Based on turnover (max R1 million)
Tax-Exempt Organizations
Some organizations don't pay tax because they benefit society:
Public Benefit Organizations (PBOs): Charities, schools, hospitals
Recreational clubs
Trade unions
These organizations must apply for tax-exempt status - it's not automatic.
Key Takeaways
1. SARS collects many different types of taxes
2. The main distinction is between direct taxes (on people/businesses) and indirect
taxes (on transactions)
3. Tax rates vary depending on what type of taxpayer you are
4. Some organizations get tax breaks because they help society
5. Understanding how taxable income is calculated is crucial for determining how much
tax you owe
This foundation will help you understand the more complex tax calculations you'll
encounter in your advanced taxation studies.