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Payroll & Tax in South Africa

South Africa payroll & taxation

There are specific rules for payroll and taxation in South Africa, depending upon whether your company employs foreign nationals or South Africans. South Africa taxes residents on their worldwide income, whereas non-residents are taxed only on income sourced in South Africa or deemed to be from a source in South Africa.

Any business that employs at least one employee must register with the South African Revenue Service (SARS) for Pay As You Earn (PAYE) and Standard Income Tax on Employees (SITE). Businesses employing staff must also pay a gross revenue or salary-related levy to the district council. Once registered, the business is charged services levies based on its total bill for salaries and wages, as well as on gross sales.

The primary concerns for a foreign company that needs to comply with tax laws in South Africa are: individual income tax for employees, unemployment insurance, payroll tax, VAT tax, withholding tax, business income tax and permanent establishment concerns.

Your Payroll Options in South Africa

Remote Payroll

A remote payroll in South Africa is where a foreign company, i.e. a non-resident company, payrolls a resident employee in South Africa.   One option for a non-resident company is to payroll its employees (local and foreign) in South Africa is to use a fully outsourced service like a GEO, which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in South Africa under one of the forms available, (Branch Office or Company) but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. However, the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to South Africa may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a South African payroll, and can fulfill all tax, withholding, and payroll requirements.

This approach carries significant costs and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with South African employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in South Africa to a GEO, like Shield GEO. This is possible for South African nationals and foreigners. The GEO manages all aspects of payroll for workers in South Africa including taxes, withholding, social security payments and other statutory requirements. The GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. The GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Business Income Tax) and a Management Fee. The GEO provides the employees with payslips.

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Setting up payroll in South Africa

Information Explanation
Currency ?

ZAR

Tax Figures

Information Explanation
Corporate Income Tax ?

Corporate income tax rate is 28%

Income Tax Rate ?
Grossed income Tax Rate (%)
0-174,550 18%
174,550-272,700 25%
272,700-377,450 30%
377,450-528,000 35%
528,000-673,100 38%
673,100+ 40%
Payroll Tax ?

N/A

Sales Tax ?

14%

Withholding Tax ?

15%

Employee Social Security (EE SS)

Unemployment Insurance Fund (UIF). Employees contribute to the fund at a rate of 1% of the employee’s remuneration up to earnings of ZAR 178,464.

Note that an expatriate’s employment income is normally exempt from UIF, subject to certain conditions being met.

Employer Social Security (ER SS)

Unemployment Insurance Fund (UIF). Employers contribute to the fund at a rate of 1% of the employee’s remuneration up to earnings of ZAR 178,464

Note than an expatriate’s employment income is normally exempt from UIF, subject to certain conditions being met.

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