Latest / Tax Break: South African tax for professionals / South African tax on residents / non-residents

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South African tax on residents / non-residents · Tax Break: South African tax for professionals

• 0:11
  Welcome and thank you for joining me for Tax Break.
• 0:13
  This is a podcast about South African Tax, 4 South African tax
• 0:17
  professionals and practitioners. My name is Peter Vanderzwan and
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  in each episode I share my thoughts with you on a topic or
• 0:24
  a recent development in South African tax.
• 0:27
  And I tried to keep the episode short enough that you can listen
• 0:30
  to them whenever you've got some time to spare during the day.
• 0:34
  Now as the background to our topic for today, over the past
• 0:39
  2-3 years I've visited quite a few individuals to declare a
• 0:43
  change in their residence status to such.
• 0:46
  So that would typically be when a person moves abroad, they
• 0:50
  would indicate on their registered details that they are
• 0:53
  no longer a resident and such with the in request certain
• 0:57
  declarations and motivations from the person to support that
• 1:01
  statement. If such agrees with your the the
• 1:06
  change in residence, you'll get the notification to say that
• 1:09
  your status you are no longer now no no longer at South
• 1:14
  African tax resident that process and the the immediate
• 1:18
  tax consequences that follow that.
• 1:20
  There's a few other earlier episodes that deal with that, so
• 1:23
  I'm not going to go into that detail today.
• 1:25
  You're welcome to go and listen to those episodes if you are
• 1:28
  interested. What I would like to speak about
• 1:32
  today is the question that they normally follows from that.
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  And that question is, does this mean that I'm finished with tax
• 1:40
  in South Africa and I never need to submit a return again?
• 1:44
  Unfortunately, the answer is not a definite no.
• 1:48
  It all depends on your facts and circumstances.
• 1:50
  But I do think that question and the answer goes to something a
• 1:54
  lot more fundamental than just persons ceasing to be a
• 1:58
  resident. It actually goes back to the the
• 2:01
  principles of how a resident is taxed versus our a non resident
• 2:06
  would be taxed in South Africa. No, it's a bit of context.
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  Before 1 January 2001, South Africa mainly taxed on the basis
• 2:15
  of South African sourced income, both residents and non residents
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  with some inclusions for certain foreign income for for
• 2:23
  residents. But since that date we've moved
• 2:26
  over to a residence based tax system.
• 2:28
  So that means that as a South African resident, you are taxed
• 2:32
  on all your income in South Africa and the disposal or any
• 2:37
  amount you receive for the disposal of any asset
• 2:39
  irrespective of where it is in the world with some recognition
• 2:44
  for foreign tax that you may have incurred on those foreign
• 2:47
  sourced amounts. The foreign tax recognition
• 2:51
  comes in the form of a rebate to in some cases a deduction under
• 2:54
  Section 6 squad. Now Section 6 squat is quite a
• 2:58
  complex provision. So I think that's if there's
• 3:00
  interest, that's a topic for a different episode.
• 3:04
  Moving then onto to the real question for today, non
• 3:08
  residents, how are they taxed? So non residents are taxed on
• 3:13
  the South African sourced income and they are taxed on the South
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  African sourced assets if they dispose of them.
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  So that sounds simple enough, but how do you know what would
• 3:25
  be your South African source income or your South African
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  sourced assets? The the answer to that, if you
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  we look at the legislation you you firstly find it in Section
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  9. So Section 9 is the the source
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  rules. So it's a provision that that
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  contains specific source rules for specific types of income.
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  It lists with, it prescribes the source for various passive
• 3:50
  incomes, so interest, royalties, dividends, stones, those kind of
• 3:54
  things. And also the source of of
• 3:57
  amounts that you derive from the sale of movable or immovable
• 4:01
  property. If you don't find the source to
• 4:05
  your specific type of income in section 9.
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  So for example there's not much on on service income.
• 4:12
  Then you need to consult case law to do establish what the
• 4:16
  source of your income would be. Now the South African sourced
• 4:20
  income that the non resident drive could would be subject to
• 4:24
  income tax either in the form of normal tax or withholding tax.
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  So for example interest paid by paid to a non South African
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  sourced income or interest paid to a non resident would be
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  subject to a withholding tax and that interest with the ingenuity
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  also qualify for exemption from normal tax.
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  So these different types of taxes that may apply depending
• 4:49
  on the types of income that you are looking at on the capital
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  gains tax side. So specific assets for non
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  residents remain within the South African capital gains tax
• 5:00
  need. Those are immovable properties
• 5:03
  situated in South Africa, Interests in immovable
• 5:07
  properties situated in South Africa.
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  There's a whole definition dealing with that, but something
• 5:13
  like, for example, a substantial shareholding in a company that
• 5:17
  derives its value from South African properties would be an
• 5:21
  interest in immovable property in South Africa.
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  And then as its attributable to a permanent establishment still
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  remains remain taxable subject to capital gains tax in South
• 5:33
  Africa. So that's just the South African
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  domestic law side of it. From an income tax perspective,
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  I think what is also important to add here is that once if an
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  amount is subject to tax under our domestic law and the
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  personal results in a country that has a tax treaty with South
• 5:51
  Africa. So double tax agreement, you
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  also need to consider that double tax agreement to see if
• 5:57
  South Africa might actually impose these taxes or not.
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  So it could become quite a complex assessment to determine
• 6:06
  whether amounts are still taxable in South Africa or not.
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  If we then go a little bit further than just income tax,
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  there are some other taxes like estate duty, it may also still
• 6:17
  apply. So from an estate duty
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  perspective, as it's of non residents are subject to estate
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  duty, but there are specific exclusions that would apply if
• 6:28
  the person does not ordinarily reside in South Africa.
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  The other point that I started off with is do non residents
• 6:37
  have to submit returns in South Africa?
• 6:40
  Again, it depends on the types of income that you've got The
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  answer to that you will find in a notice that SASH publishes on
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  an annual basis in terms of Section 66 of the Income Tax Act
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  and that let notice lists specifically who needs to submit
• 6:56
  returns in South Africa. If you income tax returns.
• 7:00
  That is if you look at the notice this there are there are
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  quite a few items that specifically deal with non
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  residents. So it may well be that a non
• 7:10
  resident still needs to submit a return in South Africa.
• 7:13
  So to summarise, non residents may still be liable for income
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  tax on South African sourced income and South African sourced
• 7:22
  assets. You do however need to also
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  consider the double tax agreements that that may exist
• 7:29
  between South Africa and the country of residence.
• 7:32
  There could also be other taxes, such as estate duty on some
• 7:37
  assets attached to South Africa. Depending on the types of income
• 7:41
  or amounts that the person receive, they may also still
• 7:44
  need to file tax returns in South Africa.
• 7:48
  That's that for today's episode. If you've got any questions,
• 7:51
  comments, please feel free to send me an e-mail.
• 7:55
  Any suggestions for, for topics for new episodes?
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  Today's topic was, was, was one of the topics suggested by a
• 8:04
  listener. So thank you for that.
• 8:06
  It's always nice to to to get into action and and inputs on
• 8:10
  what you would like to hear in the podcast.
• 8:13
  If you like the podcast, please tell all your friends and
• 8:16
  colleagues and go and subscribe on your favorite podcast
• 8:19
  platform. And then lastly, just remind us
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  always nothing in this podcast was intended to be a tax advice
• 8:27
  or a replacement for tax advice. Until next time, goodbye.