List of Tax Codes in South Africa - Guide for Employers

Doing business in South Africa and have people working for you there? If you’re running payroll for your company and you have international workers, you may need to learn about tax codes in different countries.

You don’t necessarily need to know everything about how the tax system works in South Africa, but a working knowledge of the relevant tax codes can be really helpful.

In this guide for UK employers, we’ll run through the essentials you need to know about tax codes in South Africa. This includes how tax codes work there and what they mean, plus a list of common tax codes you’re likely to come across.

We’ll also show you how to make paying overseas employees easier using solutions like Wise Business.

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What do tax codes mean in South Africa?

Tax codes are a way of telling an employer how much tax to deduct from an employee’s pay. They’re part of the Pay As You Earn (PAYE) system in South Africa. They’re also used when individuals submit their tax return at the end of the financial year. This is known as the IRP5.

The income tax system in South Africa is managed by SARS, the South African Revenue Service.

Established in 1997, SARS is the nation’s official tax collecting authority. It works with both employers and employees, as well as businesses of all sizes, to administer the South African tax system and customs service. So if you need information or advice on tax in South Africa, in relation to running your business or paying employees, SARS is the place to go.

Employers of people working in South Africa need to make sure that they’re using the right tax codes when running payroll. If the wrong code is used, it could result in the underpayment or overpayment of income tax.

Understanding the tax system in another country can of course be very complicated. To avoid making a costly mistake or spending too much time getting to grips with income tax, it could be well worth working with an expert. A local accountant, tax consultant or payroll service based in South Africa could be extremely helpful.

How do South Africa tax codes work?

South African tax codes are used to identify different types of income. The most common tax code is 3601, which refers to income received as part of a basic salary from employment. This is the code that will apply to most employees earning a salary when working for your company.

But there are also tax codes relating to commission payments and travel allowances, annual bonuses and one-off payments. There’s a whole separate set of tax codes relating to deductions, pension fund contributions, tax credits and employer contributions too.

Tax codes are most likely to be used as part of an annual tax return, known as the IRP5 and submitted by individuals at the end of the tax year. However, employers should still be aware of them just in case they do impact on PAYE and running payroll at any point.

List of South African tax codes

Tax codes in South Africa are primarily made up of four numbers, usually starting with a 3. This is unlike in some other countries such as the UK where tax codes are made up of a mix of both letters and numbers.

To help make payroll just a little easier for you as a UK employer, here’s a quick look at some of the most commonly used tax codes in South Africa:¹

FAQs - tax codes in South Africa

Why are tax codes important for employers and employees?

Tax codes ensure that income and deductions are correctly classified and reported to tax authorities, which is essential for accurate tax calculations and compliance.
Proper use of tax codes helps prevent errors in tax returns and ensures that both employers and employees meet their tax obligations.

What are the consequences of using incorrect tax codes?

Using incorrect tax codes can lead to inaccurate tax calculations, potential penalties, and non-compliance with tax laws. It may result in employees overpaying or underpaying taxes, necessitating corrections and possible interest charges.

Are tax codes updated regularly, and how can I stay informed about changes?

Yes, tax codes can be updated to reflect changes in tax legislation or policy. Employers should regularly consult the SARS website and official publications to stay informed about any updates or changes to tax codes.

Manage international business with Wise

Income tax can be complicated, but paying your staff doesn’t have to be. If you have employees spread across branches in South Africa, the UK and other countries worldwide, you can pay them all quickly and easily using Wise Business.

Open a Wise Business account and you can pay up to 1,000 people at once using the handy Batch Payments tool. It’s even possible to automate payments with the Wise API to save time. Plus, you can seamlessly integrate your accounting tools and other business software with your Wise Business account to keep things running smoothly.

Not only does Wise Business save you time on payroll, but money too. With Wise, you can send global payments in multiple currencies and the mid-market exchange rate. If you have an international workforce or have expenses to pay in other countries, this could save your business a bundle.

Wise Business also has lots of other useful features. This includes cards for managing expenses, local account details so you can get paid faster in your client’s currency, and much more.

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And that’s it - our helpful guide to income tax codes in South Africa. We’ve looked at how tax codes work and why you need to know about them as a business owner with branches and employees in South Africa. Plus, a list of common tax codes so you can start familiarising yourself with them.

This should act as a useful starting point as you get to grips with your obligations as an employer in South Africa. But don’t forget that if you need help, it’s always a good idea to consult a specialist for expert tax advice.

Sources used for this article:

Sources last checked December 30, 2024.