South Africa

Registrations and Establishing an Entity

A company is required to have a legal entity established in order to process a payroll.

All taxes deducted must be paid over to South Africa Revenue Services (SARS) and can only be done once the entity is registered with SARS. All companies must have a physical business address and local bank account.

The timescale for completion of this process and a list of the relevant registrations is outlined below:

• Registration with the Registrar’s office = one - six months
• Registration with SARS for company income tax = one - six months
• Registration with SARS for VAT = one - six months
• Registration with SARS for PAYE/SDL/UIF = two - three months
• Registration with the DOL for Workman’s Compensation = one - six months
• Registration with the DOL for unemployment benefits = one month
  
  

Once the legal entity is established, the company has to complete all payroll related statutory registrations.

It is imperative that the applications for payroll related registrations are completed in full.

From the time the documentation is submitted to receiving a registration number takes 21 days. This is the time the statutory bodies take to process the registration application. If the documents are not completed in full, the applicable authority will reject the application and it will need to be resubmitted with a further waiting time of 21 days, hence the importance of having everything correct before submission.

The client must be registered for the following:

• PAYE (employees’ taxes)
• UIF (unemployment insurance)
• SDL (skills development levy)
• OID (occupational injuries and disease insurance)
  
  

Should the company commence payment of the employee before the registrations are complete, the statutory bodies will charge penalties of 10% plus interest as per the gazetted rate by Reserve Bank p.m. for all payments that should have been made while waiting for the registration numbers. It is not possible to make payments to the statutory bodies without a registration number. Due to this situation, it is good practice to get the registration process underway at least three months before the company intends to start paying employees.

Working Week

The working week in South Africa is Monday to Friday. The maximum number of hours that can be worked per week is 45 and no more than nine hours per day.

Overtime can be worked in accordance with an agreement. The maximum overtime that may be worked is three hours a day or 10 hours a week; this again must be in accordance with an agreement. The maximum number of hours (normal plus overtime) that can then be worked by an employee in a day is 12 hours.

Tax, Employee Provident Fund, Social Security & Human Resource Development

The tax year runs from 1st March to 28th February. Anyone with a SA ID can register on South African Revenue Service (SARS) and use e-filing to do these filings.

Each client may, after being registered with SARS and Unemployment Insurance Fund (UIF), transfer their responsibility to their payroll provider, who will then, on their behalf, complete and submit the monthly, bi-annual and annual returns. If the payroll provider is not a registered tax consultant agency, they may submit returns as part of their service, when compelled and authorized by the client.

All taxes deducted must be paid over to SARS and can only be done once the entity is registered. The company must have a physical business address and local bank account.

There is a 10% penalty on outstanding amounts (either income tax or social security) as well as interest at the rate to be determined at that specific period in time (currently 11.75%).

Income Tax

The employer must be registered for PAYE (Pay as You Earn)/SDL/UIF with SARS. The employee is responsible for registering him/herself for income tax with SARS. It is the employer’s responsibility to obtain the employee’s income tax reference number before any payments are allowed to be made to the employee. It is the employer’s responsibility to calculate taxes as per the statutory tax tables and to withhold such taxes from the employee’s salary and to pay it over to SARS every month.

It must be paid to SARS before/on the 7th day of the following month; if the 7th falls on a weekend then on the Friday preceding the weekend.

A provisional taxpayer is any person who earns income other than remuneration or an allowance or advance payable by the person’s principal. An individual is exempt from the payment of provisional tax if he or she does not carry on any business and his or her taxable income:

• will not exceed the tax threshold for the tax year; or
• from interest, dividends, foreign dividends and rental from the letting of fixed property will be R30 000 or less for the tax year.
  
  

Age – Tax Threshold

• Below age 65 – R95 750
  
  
• Age 65 to below 75 – R148 217
  
  
• Age 75 and over – R165 689
  
  

The individual tax rates are as follows:

REBATES

• Primary: R17 235
• Secondary (Persons 65 and older): R9 444
• Tertiary (Persons 75 and older): R3 145
  
  

The penalty for late payments is 10% of the total amount, interest is then charged daily until payments have been made.

Reporting

Monthly EMP201 Tax Return

The following information is required to complete the document:

• Total amount of PAYE withheld from employees
• Total amount of SDL employer contributions
• Total amount of employee and employer contributions towards UIF
  
  

The documents are required to be submitted to SARS electronically through e-filing.
They must be submitted before the 7th day of the following month; if the 7th falls on a weekend, then on the Friday preceding the weekend. The documents can be submitted by anyone who is registered on e-filing to receive the monthly EMP201 returns from SARS on their e-filing profile.

It is signed electronically by the person who submitted the return through e-filing.

Bi-Annual and Year-End EMP501 Tax Reconciliation

The following information is required to complete the document:

• Total amount of PAYE, SDL & UIF withheld from employees and paid over to SARS for the first six months of the tax year (March to August) and then later again (February) for the full 12 months period
  
  

The documents are required to be submitted to SARS electronically through Easyfile before 31st May each year.

The documents can be submitted by anyone who is registered on E-Filing and Easyfile to receive the annual EMP501 return from SARS and to submit it electronically through Easyfile to SARS. It is signed electronically by the person who submitted the return through Easyfile.

Annual WCA Workman’s Compensation return

The following information is required to complete the document:

• Gross remuneration for the full tax year capped to the maximum WCA amount per employee and the number of employees per month for the current tax year as well as an estimation for all of the before-mentioned for the following tax year.
  
  

The documents are required to be submitted to the Department of Labor (DOL) in person on the 31st March each year.

The Department of Labour introduced the submission of Returns of Earnings online; registration should be completed on the Department of Labour website and submit returns at CF-Filing.

The documents can be submitted in person or electronically by either the employer or payroll partner.

A representative or the employer must sign the original bar-coded return.

UIF submission

The following information is required to complete the document:

• Start date
• End date
• Reason of exit per employee

The documents are required to be submitted to the UIF office electronically before the 7th day of the following month. The documents can be submitted by either the employer or payroll partner by email.

New Employees

All employees need to register for income tax with SARS. The employer or payroll partner can do this on their behalf through SARS E-filing. This must be done before the first payment is made to the employee.

The following information is required to set up a new start:

• Company Number
• Employee Number
• Employee Title
• Employee Initials
• Employee Full Name
• Gender
• Marital Status
• Nationality
• RSA ID Number (Social Security)
• Date of Birth
• Passport No
• Address
• Employee Start Date
• Permanent/Temporary
• Job Title
• Annual Salary/ Hourly Rate/Daily Rate
• Bank Name and Details
• Account Name/Type
• Income Tax Reference Number
• Cost Centre Number
• Name of Cost Centre
• Annual Leave Entitlement
  
  

Expat new employees are required to provide the following documentation:

• Copies of Signed Contract
• Work Permit
• Passport
• Income Tax Reference Number

Leavers

It is common practice to pay the employee on their final day, although there is no specification set out.

It is mandatory to issue form UI19 to the employees. This is a form the employees can take to the UIF department to claim unemployment.

Employee Benefits

It is not a statutory requirement to offer any pension or retirement fund benefits to employees. There is no Government Pension Fund available for any employee. The Government Pension Fund, SASSA (South African Social Security Agency), only provides for low/no income pensioners with strict control on the eligibility of such a pensioner/disabled person however; most employers offer either a Pension Fund or a Provident Fund along with a Medical Health Benefit from an independent service provider.

Employers can split the monthly contributions into an employer/employee premium, from 50% to 2/3rd contributions on behalf of the employee.

Certain employer paid benefits are considered a taxable benefit to the employee and statutory and source deductions must be calculated on the benefit cost. The taxable benefits must be reported on the Canadian tax slips (T4, T4A, RL1, RL2…) in the applicable boxes.

Expenses

Most allowances have been done away with and are all now fully taxable.

General expenses need to be reimbursed to the employee through the payroll.

Car mileage needs to be reimbursed to the employee through the payroll and must be declared on the employee’s Tax Certificate.

Additionally, the South African Revenue Services (SARS) issued a notice announcing new rates for subsistence and travel allowance rates as per below. The new rates are effective from 1 March 2025.

Subsistence Allowance:

• Overnight Trips – Meals and incidentals: Increased from R548 to R570
• Overnight Trips – Incidentals only: Increased from R169 to R176
• Day Trips – Meals and incidentals: Increased from R169 to R176
  
  

Travel Allowances

• Motor vehicle rate per kilometre – Reduced from R4.84 to R4.76
  
  

Common expenses would include, but are not limited to:

• Cell Phone
• Fuel
• Data Card
• Subsistence
• Toll Fees
• Parking
• Air Travel
• Entertainment

Visas & Work Permits

It is a requirement for anyone who wishes to work in South Africa, accept voluntary or paid employment or studies must apply for a work, work-seeker's or study permit. If you apply for a permit then it is not necessary to also apply for a visa, as the permit also functions as a visa.

Quota Work Permit

The government has made a pre-determined number of visas available to address skills shortages in certain occupations as part of its economic growth plans. For example, engineers, artisans and technical skills. The quota work permit is "open ended", meaning it is valid for as long as you stay employed in the original approved category or profession.

General Work Permit

Foreigners who have general qualifications and intend to work in South Africa are issued with a general work permit. A general work permit is valid for the duration of the contract. However, it will lapse six months after being issued (and every year thereafter) unless employees submit "satisfactory proof" to the Department of Home Affairs that they are still employed.

Exceptional Skills Work Permit

Foreigners who are highly skilled or have exceptional qualifications and intend to work in South Africa are issued with an exceptional skills work permit. An exceptional skills permit is valid for three years.

Intra-Company Transfer Work Permit

An employee who is being transferred from their company to work in South Africa shall be granted an intra-company transfer work permit. All intra-company transfer work permits are valid for two years.

Other Permits

The permits below are not considered as work permits. They are however permits associated with doing business or working in South Africa:

• Corporate Permit: For South African companies who need to employ foreign personnel. Validity set on application.
• Business Permit: Issued to foreigners who intend to establish or invest in a business South Africa in which they may be employed.
• Exchange Permits: These permits are issued to applicants younger than 25 years, who may only work for one year. Exchange permits are valid for length of the program, or to a maximum of one year.
  
  

The Trusted Employer Scheme

The Trusted Employer Scheme is set to be the linchpin of this transformation, designed to simplify immigration management and cater to the needs of high-skilled professionals, technical experts, corporate professionals, and investors.

Under the TES, companies and employers will bear the responsibility of demonstrating financial strength, participating in training programs for South African citizens, and maintaining the mantle of good corporate citizenship. In exchange, they will enjoy priority processing of visa applications, reducing the burden of documentation and enhancing the efficiency of the process.

• Employers must have a physical address and local bank account to register for taxes and process payroll
• SARS e-filing and Easyfile platforms are mandatory for tax submissions
• Penalties for non-compliance include 10% fines plus interest (11.75% at time of writing)
• New SARS two-pot pension system launched 1 September 2024
• Public holidays are not paid unless ordinarily worked, as per BCEA thresholds
• Workman’s Compensation requires annual submissions via CF-Filing portal
  
• SARS travel & subsistence rates updated annually (effective March 1)
• BCEA earnings threshold (2025): R261,748.45
• Employees earning above this are exempt from sections on ordinary hours, overtime, night work, etc.
  
  

Further Information

For more information, or assistance with South Africa Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.