South Africa Introduces New Tax For Foreign Entertainers

by Robert Lee, Tax-News.com, London

01 August 2006

A new withholding tax system will come into effect from 1 August 2006 for entertainers and sportspeople who are not resident in South Africa for income tax purposes.

Previously, foreign entertainers and sportsmen and women were taxed on income derived from their performances in South Africa on a similar basis to South African residents; but, according to the South African Revenue Services (SARS), this system has proven to be "very impractical" in view of their very short stays in the country.

Under the new withholding tax system, event organisers, producers and others who make payments to foreign entertainers and sportspeople for performances in South Africa on or after 1 August 2006 will have to withhold a 15% tax from these payments.

Where it is not possible for the withholding tax to be imposed, the foreign entertainer or sportsperson is liable for the payment of the 15% tax.

Reporting requirements have been introduced to ensure that SARS is informed beforehand of performances. A resident who agrees to found, organise, or facilitate a performance for profit is required to notify SARS of the performance within 14 days of concluding the agreement.

The withholding tax system was announced in the 2005 Budget and included in the Revenue Laws Amendment Act, 2005.

SARS recently stated that the withholding tax system is "consistent with international practice and the agreements for the avoidance of double taxation that South Africa has concluded with other countries".

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