Navigating the tax system in South Africa can be a daunting task for any young professionals. However, having a basic understanding of the taxes you’re likely to encounter and how to manage them effectively can make a big difference in your financial wellbeing. There’s no need to be overwhelmed by a letter in the mail from SARS. In this read we’re running through 3 taxes that impact you in South Africa.

When you understand these taxes and how they apply to you, you can take steps to reduce your tax burden and increase your financial stability.

Income tax is based on your taxable income and is calculated using progressive tax brackets. This means that the more you earn, the higher your tax rate will be.

If you are a salaried employee, your employer will hold back a portion of your salary and pay this tax portion over to SARS on your behalf. If you are self-employed, this is now your responsibility. You become a provisional tax payer and pay twice a year to help you manage the burden. 

Remember that income tax is a tax we are able to cleverly (and legally!) reduce through nifty tactics.

VAT is a tax on the value of goods and services. It’s typically included in the price you pay for these items – so you don’t really notice it. VAT is currently at 15%. 

Certain items such as basic foods (vegetables, brown bread, fruit), farming inputs, exports and paraffin are examples of items that are zero rated. That means VAT on these items is calculated at 0%. 

Education services, rent and public road and rail transport are examples of items that are VAT exempt. In this case, there is no VAT payable on it.

CGT is levied on the profit or proceeds you make when you sell an asset such as property or shares and comes into play when you decide to partially or fully withdraw your investment. If the value of your investment has increased since its inception, you will be liable for tax on the growth/gains you have earned.

REMEMBER: Only 40% of the capital gain is included and there is also an annual exclusion of R40,000. If the capital gain is less than R40 000 for the year, there will be no CGT payable.

Tax can be very overwhelming but it doesn’t have to be. I can help you understand how taxes impact your particular circumstance and show you some nifty and legal ways you can reduce your tax burden.

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