Unit 6 Flashcards
Residency & Cross-border Transactions
What is the organisation on which modern international tax law is based?
OECD - Organisation for Economic Co-operation and Development
Which legislative piece regulates exchange control?
Currency and Exchange Act
What are the 2 tax systems used globally?
Source based
Residency based
Discuss the SA taxation principles? (4)
Residence based (as a starting point)
Source based also applies
If double taxation hiders trade, a sec6 quat rebate can be claimed
Different treatment of residents and non-residents (for tax purposes)
What 3 types are used in combination to determine source?
Case law
“Deemed-source” rules
Tax treaty principles
What is the position on non-residents?
Income from sources within SA subject to tax
With certain exemptions
Which section determines rules relating to ‘source’?
Section 9
If you are a resident would section 9 apply?
Since you are a resident you will be taxed on Gross Income, so section 9 will NOT be applicable.
Discuss ‘true source’
Lever Brothers: True source - Originating cause - Quid pro quo
2 questions:
- WHAT is the originating cause of the income?
- WHERE is the originating cause located?
Which items are included as sources in section 9? (12)
Dividends Interest Royalties Exchange differences Pension/annuity Retirement fund Employment income Rental income Business activities Scientific knowledge CGT immovable CGT movable
Discuss ‘tax treaties’
Avoid double taxation
Exchange of information
OECD Model Tax Convention on Income and Capital
UN Model Double Taxation Convention between Developed and Developing Countries
Commentary on treaties helps with interpretation
Reconcile with domestic law
Residents of both states covered
A section 6 quat of ITA provides credits
If a tax treaty and domestic law is in conflict, which takes precedence?
The tax treaty
Which categories are applicable to tax treaties? (9)
Income from immovable property Dividends Interest Royalties Employment-related income Students Artists and sportsmen International traffic Business profits
With non-residents, can both normal tax AND withholding tax apply?
No, only one of the two can apply.
What is the scale for withholding tax on immovable property for non-residents?
7.5% to 15%
What is the scale for withholding tax on foreign entertainers/sportspersons for non-residents?
15%
What is the scale for withholding tax on royalties for non-residents?
15%
What is the scale for withholding tax on interest earned by foreign person for non-residents?
15%
Name 4 exemptions from worldwide-income for residents
Certain foreign dividends and CGT
Foreign employment income
Foreign pensions & welfare payments
International shipping activities by domestically flagged ships
What must be kept in mind at all times to determine which legislation applies?
Whether RESIDENT or NON-RESIDENT
What is a double taxation agreement rebate called?
A section 6 quat
