Tax Residency in South Africa

SARS External Guide - ITR12 Income Tax Return for Individuals

• This guide provides comprehensive information for completing the ITR12 South African Income Tax Return for Individuals.
• The effective date is 24 June 2024.
• Revision 32.
• The guide covers 135 pages.
• A table of contents is included.

Summary

• Taxpayers must submit the ITR12 by the due date as published in the Government Gazette.
• The deadline varies by taxpayer status (e.g. provisional vs. non-provisional).
• Certain taxpayers are not required to submit a return if their gross income falls below a certain threshold or meets specified conditions.
• SARS offers various methods for requesting and submitting returns (e.g., eFiling, mobile app).
• SARS may automatically assess tax returns based on available data, and taxpayers have the option to confirm or dispute the assessment.
• Taxpayers can seek guidance from accredited tax practitioners.

General Information

• Due Dates: Income tax return deadlines are published annually in the Government Gazette.
• Exemptions: Taxpayers with specific income sources or below income limits might not be required to submit a return. This includes certain remunerations or interest.
• Documentation: Supporting documents are crucial, for example, IRP5/IT3(a) Employee Tax Certificates, interest statements, and receipts.

Information to Create the ITR12

• Form Wizard: This tool on the SARS website helps guide the completion of the tax return.
• Standard Questions: These questions cover personal details, employment status, deductions, investments, assets, donations, employment-related income, local or foreign income and allowable expenses.

Completing the Return

• Taxpayer Information: (Name, ID, contact details, residence, etc.). This section is vital and often pre-populated.
• Declaration and Signature: Taxpayers or tax practitioners sign the return, verifying the completeness and accuracy of the information provided.

Taxpayer Information - Income

• Investment Income: Includes local and foreign interest and dividends.
• Foreign Income: This includes various types of foreign income, excluding investment income.
• Capital Gains/Losses: This section covers capital assets such as shares, and property and includes details for both local and foreign transactions.
• Trust Income: Income from trusts must be separately declared.
• Rental Income: Separate section is provided for income from leased property.
• Director/Member of Close Corporation: If applicable, this section requires listing the business activities conducted as a director/member.
• Donations: Specify any donations made to approved entities.

Deductions

• Medical Expenses: Taxpayers can claim tax credits for medical scheme contributions.
• Retirement Contributions: Tax credits/deductions are available for contributions during the relevant year.
• Other Deductions: This broad category includes a wide range of other deductible expenses, such as travel expenses (with logbooks), legal fees, expenses related to home office use, etc.

Residency Information

• Residence Basis: South Africa has switched from a source-based tax system to a residence basis. Taxpayers residing in South Africa are assessed on worldwide income. Non-residents are taxed on their South African-source income.
• Spousal Assessment: If married in community of property, income is usually jointly declared. This involves the sharing of both income and deductions based on the portions assigned.

Tax Credits

• Foreign Tax Credits: Taxpayers are eligible for credits for some foreign taxes paid on South African-sourced or foreign-sourced income.

Specific Sections

• Urban Development Zones (UDZ): A deduction for accelerated depreciation may be available for certain buildings in UDZs.
• Research & Development: Taxpayers can claim deductions for qualifying research and development expenses.
• Venture Capital Companies: Income earned through approved Venture Capital Companies may qualify for deductions.
• Partnerships: Details for partnership income and expenses are required, including share percentages.
• Information on Capital Improvements: Taxpayers can have deductions for these if they spent money on certain improvements to premises.
• Other Taxable Receipts & Accruals: Taxpayers should declare any other income not fitting in other pre-defined categories.

Other Important Topics

• Voluntary Disclosure Programme (VDP): SARS programmatically allows taxpayers to resolve unpaid tax or non-compliance concerns, in cases where a return has not been filed by the deadline or the taxpayer has underdeclared income.
• Provisional Tax: An advance tax payment system for certain taxpayers to avoid a large tax balance at the end of the tax year.

Summary of Important Topics

• Electronic Filing: SARS prefers electronic filing of tax returns where practicable. Information, such as banking details, and other records necessary to complete the returns should be retained for a period of five years after submission of the tax return, for SARS auditing purposes.