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South Africa Issues Tax Guide For Foreigners

by Lorys Charalambous,, Cyprus

03 April 2015

The South African Revenue Service has revised its guide for individuals not resident in South Africa about the tax treatment of South Africa-sourced income.

Its "Guide on the Taxation of Foreigners Working in South Africa 2014/15" deals mainly with employment income. Under the country's income tax system, only amounts received by or accrued to non-residents from a source within South Africa are subject to South African income tax.

In other word, subject to the South African ordinary residence or physical presence non-residency tests, foreigners working in South Africa are not liable to South African income tax on income earned by them outside South Africa.

Non-resident foreigners have to register with SARS and complete a tax return if their South African income exceeds the minimum earnings threshold. In addition, South African employers must deduct pay-as-you-earn (PAYE) income tax from a foreigner's income for those services rendered in South Africa (including from any salary, bonus, benefits, and allowances).

Income received by such a foreigner for services rendered both inside and outside South Africa should be apportioned based on the days worked in and outside of the country, and South African-sourced income received by a foreigner from sources other than an employer (business, investment, and rental income) must also be included in the foreigner's gross income for the year of assessment.

The tax code requires that the taxable income from each source within South Africa must be determined separately. Therefore, only expenditure relating to a specific source of income may be deducted from that source. For example, rental expenses must be deducted from rental income, and rental expenses cannot be claimed against income from other trades.

Taxable income from all sources within South Africa is then added together, after deductions, to calculate a foreigner's final overall tax liability.

The Guide also contains an explanation of the separate rules applying for payments to foreign entertainers or sportspersons. A resident making a payment to such an individual must deduct or withhold a final 15 percent tax from that payment, and transmit the tax withheld to SARS on behalf of the foreign entertainer or sportsperson before the end of the following month.

The 15 percent withholding tax on a foreign entertainer or sportsperson is not applicable to a foreign entertainer or sportsperson who is physically present in South Africa for more than 183 days in aggregate in a 12-month period that begins or ends in a year of assessment.

In these circumstances, no withholding tax is deducted and the foreign entertainer or sportsperson has to pay income tax on the same basis as a resident at the prescribed rate of income tax, which may require the submission of an income tax return. Such payments, made by the South African employer to the foreign entertainer or sportsperson, are regarded as employee remuneration.

TAGS: individuals | expatriates | South Africa | compliance | tax | tax compliance | revenue guidance | entertainers | tax authority | sportsmen | withholding tax | individual income tax | services | Work | Africa | Tax

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