Bank interest in South Africa can be taxed at 45%
By the AFREEQUE newsroom, based on Daily Maverick
Illustrative image · Mikhail Nilov · Pexels · Licence PexelsIn South Africa, bank deposit interest can be taxed at up to 45% for taxpayers in the highest marginal tax bracket, while capital gains are subject to a maximum effective rate of 18%. A financial adviser recommends investing money not needed in the short term in capital-growth investments, according to the Daily Maverick.
In South Africa, interest earned on bank accounts can be taxed at the top marginal rate of 45%, while the maximum effective rate on capital gains is 18%, the Daily Maverick explains. The publication recommends that taxpayers who do not need their money in the short term consider investments aimed at capital growth rather than generating interest, while noting that returns are not guaranteed.
South African tax residents must also declare interest from their overseas accounts, even if the money remains outside the country. This interest does not benefit from the annual exemption granted to interest earned in South Africa. The Daily Maverick also points out that funds held abroad may require additional legal procedures when their owner dies and may be subject to local inheritance taxes.
A R50,000 annual exclusion applies to capital gains, the publication says. Wealth planning must therefore take into account income tax, after-tax returns and inheritance consequences.
