Six taxes you didn't know about

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You’re probably familiar with income tax, import tax and property tax, but there are plenty of other ways the government takes a little bit of your money. Understanding these less-familiar forms of tax will help you get a better grip on your finances. If you own a small business, it can help you navigate your various financial obligations. Let’s dive in!

1. Capital gains tax (CGT)

This is tax imposed on profits earned from the sale of certain assets, like stocks, bonds, property and valuable collectibles. Tax is levied on the difference between the purchase price and the selling price of the asset, and the rate varies depending on your income and how long you’ve owned the asset. Make sure you’re aware of CGT if you suddenly decide to sell the house that has been in your family for generations!

2. Value-Added tax (VAT)

This is tax applied to the purchase of goods and services. In South Africa, the standard VAT rate is 15%. Some things are exempt from VAT, like certain basic foods and residential rental, for example. It’s a ‘transparent tax’, which means it’s stated on receipts and invoices – you can see exactly how much tax you’re paying on each transaction.

3. Estate tax

Also known as estate duty’, this is levied on the value of a deceased person's estate (what they own) before the rest is distributed to their heirs. Tax is usually calculated on the net worth of the estate, including assets like property, investments and other valuable possessions less liabilities that at the time of death. There are various deductions and rebates when it comes to estate tax – it’s advisable to consult with an estate planning professional to help minimise the impact for your beneficiaries.

4. Donation tax

Also known as ‘gift tax’, this is imposed on the transfer of assets or property as a gift from one person to another - the giver pays the tax in this case. It prevents people from avoiding estate tax by giving away their assets before their death, and it applies to cash and non-cash gifts above a certain threshold. That said, there are usually exemptions and exclusions for small gifts, certain charitable donations and gifts between spouses. In South Africa, taxpayers can donate up to R100,000 with no tax implications.

5. Expat and exit tax

South Africans working abroad but still paying tax in South Africa are required to pay tax on any foreign income and any locally-sourced income. There are tax treaties between certain countries and also a foreign-income exemption, however, which allows expats to exempt a portion of their income from South African tax. (As always, there are certain criteria that have to be met.)

Exit tax is imposed on individuals who give up their South African citizenship or residency; or who move their assets outside South Africa. The technical term is to ‘emigrate financially’ and if you decided to go that route, you’ll be charged capital gains tax on your worldwide assets. (You’ll also have to start paying tax in the country you’ve emigrated to.)

6. ‘Sin’ tax

This is a slang term for excise tax imposed on goods or activities that are considered harmful to public health or society, like tobacco products, alcohol, sugary beverages and gambling. The purpose of sin tax is twofold: to discourage the consumption of unhealthy or addictive substances; and to generate revenue for public welfare programs or healthcare initiatives.

If you’re unsure about whether you’re liable for any of these taxes, set up a meeting with a tax professional who will be able to guide you through it. You might not be able to avoid tax, but you should make sure you’re only paying as much as you have to!