Accounting & Tax Glossary
Plain-language definitions for South African accounting, tax and compliance terms.
A
AFS — Annual Financial Statements
A set of financial reports—including the balance sheet, income statement and cash-flow statement—prepared at the end of a company’s financial year. South African companies must file AFS with CIPC within six months of year-end.
Assessed Loss
A tax loss that occurs when allowable deductions exceed taxable income. Assessed losses can be carried forward to offset future taxable income, subject to SARS rules on trade and anti-avoidance provisions.
Audit
An independent examination of financial statements to verify they present a true and fair view. In South Africa, public companies and qualifying entities above certain thresholds must undergo an annual audit by a registered auditor.
B
B-BBEE — Broad-Based Black Economic Empowerment
A legislative framework aimed at increasing economic participation of black South Africans. Businesses are rated on a scorecard covering ownership, management control, skills development, enterprise and supplier development, and socio-economic development.
Balance Sheet
A financial statement that reports a company’s assets, liabilities and equity at a specific point in time. It follows the equation: Assets = Liabilities + Equity.
BCEA — Basic Conditions of Employment Act
Legislation that sets minimum standards for working hours, leave, remuneration and notice periods in South Africa. It applies to all employers and employees except members of the SANDF, NIA and unpaid volunteers.
C
CGT — Capital Gains Tax
A tax on the profit made from selling or disposing of an asset. In South Africa, CGT is not a separate tax but forms part of income tax, with an inclusion rate of 40% for individuals and 80% for companies.
CIPC — Companies and Intellectual Property Commission
The government body responsible for company registrations, annual returns, and intellectual property rights in South Africa. All registered companies must file annual returns with CIPC to maintain their status.
COIDA — Compensation for Occupational Injuries and Diseases Act
Legislation that provides compensation to employees who are injured or contract diseases during the course of their employment. All employers must register with the Compensation Fund and pay annual assessments.
CIT — Corporate Income Tax
Tax levied on the taxable income of companies registered in South Africa. The current CIT rate is 27%. Companies must file a provisional tax return (IRP6) twice a year and a final ITR14 return after year-end.
D
Depreciation
The systematic allocation of an asset’s cost over its useful life. For tax purposes, SARS allows wear-and-tear deductions calculated on specified rates depending on the type of asset.
Dividends Tax
A withholding tax of 20% levied on dividends paid by South African companies to their shareholders. The company paying the dividend withholds the tax and pays it to SARS on behalf of the shareholder.
Donations Tax
A tax of 20% on the value of property donated, payable by the donor. Natural persons may donate up to R100,000 per year without incurring donations tax. Donations to approved public benefit organisations (Section 18A) are exempt.
E
EMP201
The monthly employer declaration submitted to SARS showing PAYE, SDL and UIF deducted from employees. It must be filed and paid by the 7th of the following month.
EMP501
The employer’s annual reconciliation declaration submitted to SARS. It reconciles all PAYE, SDL and UIF paid during the tax year against the individual employee tax certificates (IRP5/IT3(a)).
eFiling
SARS’s free online platform that allows taxpayers to register, file returns, make payments and manage their tax affairs. It is the primary channel for submitting ITR12, VAT201, EMP201 and other returns.
F
Fringe Benefit
A non-cash benefit provided by an employer to an employee, such as a company car, housing or medical aid contributions. Fringe benefits are taxable and must be included in the employee’s gross income for PAYE purposes.
G
Gross Income
The total amount received by or accrued to a taxpayer before deductions or exemptions are applied. It includes salary, interest, rental income and all other sources of income, both local and foreign for South African residents.
H
Home Office Deduction
A tax deduction for expenses related to a dedicated home office used regularly and exclusively for trade purposes. Qualifying expenses include rent, rates, repairs and a proportional share of household running costs.
I
Income Tax
Tax levied on the taxable income of individuals and companies. South Africa uses a progressive tax system for individuals, with rates ranging from 18% to 45% depending on the income bracket.
IRP5 — Employee Tax Certificate
A certificate issued by an employer reflecting an employee’s income, deductions and tax contributions for the tax year. It is used to complete the individual’s ITR12 tax return.
IRP6 — Provisional Tax Return
The return used by provisional taxpayers to declare estimated taxable income and pay tax in advance. Two compulsory submissions are required per year, with an optional third “top-up” payment.
ITR12 — Individual Income Tax Return
The annual tax return filed by individual taxpayers in South Africa. It declares all sources of income, deductions, and tax credits for the year of assessment, and is submitted via SARS eFiling or at a SARS branch.
IFRS — International Financial Reporting Standards
A set of globally recognised accounting standards for preparing financial statements. South African listed companies are required to prepare their financial statements in accordance with IFRS.
J
Journal Entry
A record of a financial transaction in the accounting system, showing the debit and credit amounts for each account affected. Journal entries form the basis of the double-entry bookkeeping system.
K
King IV — King IV Report on Corporate Governance
South Africa’s corporate governance code that applies to all organisations on an “apply and explain” basis. It covers leadership, strategy, performance, reporting and stakeholder relationships.
L
Lump Sum
A one-time payment, such as a severance, retirement or retrenchment payout. Lump sums are taxed on a separate table in South Africa, with the first R550,000 being tax-free on retirement (lifetime cumulative).
M
Medical Tax Credit
A fixed monthly credit that reduces your tax liability for contributions made to a registered medical scheme. The credit applies to the main member, the first dependant and each additional dependant at set rates published annually by SARS.
N
Notice of Assessment
An official document issued by SARS after processing a tax return, showing the calculated tax liability or refund. Taxpayers who disagree with the assessment may lodge an objection within 30 business days.
O
Objection
A formal dispute lodged with SARS when a taxpayer disagrees with an assessment. Objections must be filed within 30 business days of the assessment date, providing grounds and supporting documents.
P
PAYE — Pay As You Earn
The system by which employers deduct income tax from employee salaries and pay it directly to SARS on a monthly basis. PAYE is not a separate tax—it is a method of collecting income tax in advance.
Provisional Tax
A method of paying income tax in advance, in at least two instalments during the tax year. It applies to individuals who earn income not subject to PAYE, such as rental income, freelancing income or business profits.
POPIA — Protection of Personal Information Act
South Africa’s data protection law that regulates how organisations collect, process, store and share personal information. Businesses must appoint an information officer and comply with eight conditions for lawful processing.
Q
Qualifying Interest
Interest income that falls within the annual exemption thresholds set by SARS. For the current tax year, individuals under 65 receive an exemption of R23,800, while those 65 and older receive R34,500.
R
Rebate
A fixed amount that directly reduces a taxpayer’s calculated tax liability. South Africa has three tiers: primary rebate (all individuals), secondary rebate (65 and older) and tertiary rebate (75 and older).
S
SAICA — South African Institute of Chartered Accountants
The professional body for Chartered Accountants (CAs) in South Africa. SAICA members are recognised as CAs(SA), a designation that requires completion of a training contract and board exams.
SAIPA — South African Institute of Professional Accountants
The professional body for professional accountants in South Africa. Members hold the Professional Accountant (SA) designation and typically focus on accounting, tax and advisory services for SMEs.
SARS — South African Revenue Service
The government agency responsible for collecting taxes and enforcing compliance with tax legislation in South Africa. SARS administers income tax, VAT, customs duties and other revenue streams.
SDL — Skills Development Levy
A levy of 1% of total employee remuneration paid by employers with an annual payroll exceeding R500,000. The funds are used to finance education and training programmes through SETAs.
Section 18A
A section of the Income Tax Act that allows taxpayers to claim a deduction for donations made to approved public benefit organisations (PBOs). The deduction is limited to 10% of taxable income.
T
Tax Directive
An instruction from SARS to an employer or fund administrator specifying the rate at which tax must be deducted from a lump-sum payment, such as a retirement fund withdrawal or retrenchment payout.
Travel Allowance
An allowance paid by an employer to an employee for using a private vehicle for business travel. It is included in taxable income, but employees may claim deductions based on actual business kilometres driven using the SARS-prescribed rate.
U
UIF — Unemployment Insurance Fund
A fund that provides short-term financial relief to workers who become unemployed, ill, or who take maternity leave. Both employers and employees contribute 1% of remuneration each (2% total), capped at a maximum monthly earnings threshold.
V
VAT — Value-Added Tax
An indirect tax of 15% levied on the supply of goods and services in South Africa. Businesses with taxable supplies exceeding R1 million in a 12-month period must register as VAT vendors.
VAT201
The VAT return submitted to SARS by registered VAT vendors, either monthly or every two months. It reconciles output VAT collected on sales with input VAT paid on purchases, and the difference is paid to or refunded by SARS.
W
Withholding Tax
Tax deducted at source before a payment is made to the recipient. In South Africa, withholding taxes apply to dividends (20%), interest paid to non-residents (15%), royalties (15%) and payments to foreign sportspersons and entertainers.
X
XBRL — eXtensible Business Reporting Language
A digital reporting standard used for submitting financial data electronically. CIPC requires annual financial statements to be filed in XBRL format for certain categories of companies in South Africa.
Y
Year of Assessment
The 12-month period over which taxable income is calculated. For individual taxpayers in South Africa, the year of assessment runs from 1 March to the end of February the following year.
Z
Zero-Rated Supply
Goods and services that are subject to VAT at a rate of 0%, meaning no VAT is charged on the sale but the supplier can still claim input VAT. Examples in South Africa include exports, certain basic foodstuffs and diesel.
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