Sars Double Taxation Agreements
“Most of Africa is covered by double taxation treaties. However, if a couple is based in South Africa and one of the spouses works mainly outside the country in Africa and the other works in South Africa, they will likely still be considered SA tax residents,” he says. But this must come with a word of caution – the DTA is not an elixir that guarantees absolution of South African taxation. Tax advisors who request DTA relief without understanding the underlying legal principles and practical requirements do so at the risk of their own clients,” Lobban said. Double taxation treaties (“DTAs”) are internationally agreed legal provisions between South Africa and another country. South Africa has dozens of such agreements with different countries, and the main purpose of a DTA is to ensure that each country subject to the agreement knows what tax rights it has towards taxpayers. The amended South African Tax Act will enter into full force on 1 March 2020. If you have international economic interests, your income may be taxable both in South Africa and abroad, resulting in double taxation. A common misconception we see among South African expats is that they believe they are “automatically exempt from tax” simply because there is a double taxation treaty between the two countries.
This is completely false and there are various factors that must be considered and objectively proven, and you are still legally obliged to file a tax return and “claim” an exemption as part of the contract facilitation. A DTA ensures that a taxpayer is not unfairly taxed both in South Africa and in the corresponding country treated in a particular DTA. It thus defends double taxation and sets out various requirements that a taxpayer must meet in order to understand where he is as a tax resident. If a South African expat were to describe 2020 in one word, “uncertainty” would undoubtedly be among the most appropriate, says Thomas Lobban, Legal Manager, Cross-Border Taxation at Tax Consulting South Africa. One of the factors to keep in mind is whether there is a double taxation agreement (DTA) between South Africa and the country where you work, he notes. “The situation is exacerbated by the fact that taxpayers have unfettered access to quick and easy tax advice, which is disseminated by `experts` on social media. Even worse, these experts often have conflicting views on what to expect, as this is a multidimensional and quite complex area of taxation,” Lobban said. You can access the texts of the respective agreements via the navigation area above. CALM IN THE STORM: DTAS OFFER QUIET RESPITE TO EXPATS “The fact that the host country has a double right to tax could provide relief when it comes to claiming tax credits in South Africa, but it is not the form of relief that informs our current discussion,” Lobban said.
In the same way, do not mix a tax residence certificate with a residence permit – this is one of the biggest missteps that night consultants make. If you ask for DTA relief due to the strength of the latter, you may experience an unpleasant surprise. “SARS takes into account your total compensation, not just your salary. This means that SA tax residents who work in certain countries and enjoy additional benefits such as security, accommodation and transport can be taxed on the total value of the package. If you have a dual passport, you will need to prove that you are a tax resident elsewhere. “With regard to income from work, most permanent contracts grant the country of residence the sole right to tax, unless the employment is carried out in a host country, in which case (subject to certain exclusion circumstances) both countries have the right to tax the income in question. The result is that your income as a South African tax resident remains taxable in South Africa. Therefore, many South Africans living and working abroad may need to consider what their legal tax treatment should look like when considering the DTA between South Africa and the country where they currently live. It is possible that a taxpayer will have to pay taxes on their foreign income in South Africa, and using a DTA may be an option to ensure that this does not happen. “We noted a particular disagreement regarding facilitation under a double taxation agreement (DTA), particularly when taxpayers wish to benefit from the relief provided for in the DTA`s residency article.
The following points are intended to clarify the most common misunderstandings in these cases. “If a taxpayer is registered as a tax resident in both countries and a DTA is in place, the DTA determines where and how a taxpayer should pay taxes on the income received,” Louw explains. Also affected are people who work in Africa, for example, on contracts, but still have their home, family and tax residence in South Africa. According to Louw, they cannot change their tax residency unless they also leave South Africa with their families. 5. You remain responsible for the difference between the tax of the host country and the sa tax The certificate of residence confirms that the taxpayer is considered a resident within the meaning of the national tax legislation of the host country. . . .