Q: A consultant
does consulting work for the World Bank. Work is done in RSA. Reports are sent
to the World Bank. World Bank pays fees under an employee agreement. World Bank
says to client that no tax is payable on the amount paid to the RSA taxpayer.
A: It is possible
that the World Bank will not deduct employees’ tax (they may not be an employer
in the RSA), but we are not aware that remuneration earned by a resident of the
RSA from the World Bank is exempt from normal tax. From the facts provided the taxpayer doesn’t
meet the section 10(1)(o)(ii) requirements and therefore doesn’t qualifies for
the exemption in respect of the foreign service. We understand that the World Bank in some
instances can provide a letter confirming that the income is in fact free from
tax – this is normally in terms of an agreement with SARS / the
Government. As the client bears the onus
of proof, we suggest that he obtains confirmation from the World Bank that the
income is free from tax.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.