Non-residents

Question 1

How is a non-resident taxed in South Africa?

Answer 1

In the case of any person other than a resident, the total amount, in cash or otherwise, received by or accrued to in favor of such person from a source within or deemed to be within the Republic during the year or period of assessment excluding receipt or accrual of a capital nature.
Non residents are required to submit a tax return in respect of all taxable income from a South African source.

Question 2

What is the requirement for a non resident to be deemed as ordinary resident?

Answer 2

A non resident who has spent a certain number of days in SA:

• more than 91 days in total in each of the current and previous five tax years and
• mote than 915 days in total during the previous 5 tax years
• if that person has left SA for more than 330 full days, he would not be deeded to be a SA resident anymore, from day 1 of the 330 day period

Question 3

Name the two case laws and their principals relating to residency

Answer 3

1. Cohen v CIR
   - return from his wandering, his usual or principal residence
2. CIR v Kuttel
   - normal resident, apart from temporary or occasional absence of long or short duration

Question 4

What is the physical presence test?

Answer 4

1. He must have been physically present in SA for more than 91 days in aggregate during the current year of assessment, and
2. He must have been physically present in SA for more than 91 days in aggregate during each of the five preceding year of assessment
3. He must have been physically present in SA for than 915 days in aggregate during the five preceding year of assessment
4. Comply with the presence test but absent for 330 continuous full days then deemed not to be a resident from first day absent

Question 5

Discuss the receipt for non resident - business income

Answer 5

Business income is taxed in terms of the normal source rules. It is taxed in South Africa if the business is carried on in South Africa

Question 6

How is a non resident taxed on remuneration and fees?

Answer 6

These are taxed in South Africa if the service is rendered in South Africa

Question 7

How is rental income of fixed property tax in the hand of nonresident?

Answer 7

This is taxed in South Africa if the dominant cause of the income arising is in South Africa. This could either be the property itself or the business in which lets the property

Question 8

How is royalties taxed in the hand of non resident?

Answer 8

These are taxed in South Africa if the intellectual property which is produce them was developed in South Africa or is used in South Africa. Intellectual property includes patent, trade marks, copyrights, commercial knowledge, etc.
The royalty is exempt from normal tax in terms of s10(1)(I). Section 9(1)(b) and (bA) deem the source to be South Africa if the intellectual property is used in South Africa.
It is subject to 12% withholding tax.

Question 9

How is dividends taxed in the hand of non resident?

Answer 9

South African dividends are included in gross income but are exempt in terms of s10(1)(k)

Question 10

How is interest taxed in the hand of non resident?

Answer 10

This is taxed if the investment is located in South Africa or if the source is deemed to be South Africa, unless the s10(1)(h) exemption is applicable. Section 9(6) deems interest to be from a South African source if the interest is earned on funds utilized if credit applied in South Africa.

Question 11

Section 35 provides the following for royalties

Answer 11

• Any person (other than a resident or a controlled foreign company) by whom any amount is received or accrued to
• for the use or right to use
• any patent, design, trademark, copyright model, pattern, plan, formula, or process or any property of a similar nature or any motion picture film, video tape or disc
• wheresoever such property was produced or made or such right to used has been granted
• shall be liable for a tax known as the withholding tax on royalties of 12% on such payment

Question 12

How is the payment of withholding tax paid to SARS?

Answer 12

By the person who incurs the liability to pay the royalty or the person who receives the amount on behalf of the non resident. It needs to be paid within 14 days if the end of the month during which the liability to pay is incurred. It is a once off payment, not part of normal tax.

Question 13

How is the sale of immovable property taxed in the hand of a non resident?

Answer 13

Source of income from the sale of immovable property is usually where the property is situated.
The sale of immovable property is subject to CGT.
section 35A provides that a withholding tax on amounts greater than R2 million paid to non resident must be withheld.
If the amount is in foreign currency, such amount must be translated into rands at spot rate on the date that it is paid to commissioner.
The amount must be paid by the purchaser within 14 days if the purchaser is a resident or within 28 days if the purchaser is a non resident.

Question 14

What is the withholding tax for sale of immovable property by a non resident?

Answer 14

5% of the total amount payable where the seller is a natural person.
7.5% where the seller is a company
10% where the seller is a trust

Question 15

What is the penalty for late payment of withholding tax on sale of immovable property?

Answer 15

The purchaser is liable for interest +10% late payment penalty.

Question 16

Discuss situations where the purchaser may not be liable for payment of withholding tax on immovable property?

Answer 16

1. Where the purchaser was not informed by the estate agent or conveyancer that the seller was a non resident in writing.
2. The estate agent and conveyancer who knew or reasonably knew that the seller was a non resident and failed to notify the purchaser will be held jointly and severally liable for the tax

Question 17

Discuss the withholding tax on payments to non resident entertainers and sportspersons

Answer 17

Any non resident who performs entertainment or takes part in any sport in republic is subject to final withholding tax known as tax on foreign entertainers and sportspersons of 15%

Question 18

What is considered as an entertainer or sportsperson?

Answer 18

Person who for reward:

• performs any activities as a theatre, motion picture, radio or television artist or a musician
• takes part in any type of sport
• takes part in any other activity which is usually regarded as of an entertainment character

Question 19

Withholding tax on payments to entertainer and sportsperson does not apply to the following…

Answer 19

1. Any person who is employee of a South African employer
2. Any person who is physically present in SA for periods exceeding 183 days in any 12 month period (such person is subject to normal tax)

Question 20

How is withholding tax on payments to entertainer and sportsperson paid?

Answer 20

By the resident who is liable to pay the entertainer or sportsperson by the end of the following month when the payment incurred.
If the tax is not withheld then the non resident must pay within 30 days of date of receipt or accrual.
If resident fails to withhold and pays the resident becomes personally liable for tax.
If payment is in foreign currency, the amount is translated at spot rate on the date it is withheld.