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Is there a tax disclosure obligation in RSA for a non-resident earning income

21 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical 

Is there a tax disclosure obligation in RSA for a non-resident earning income from RSA company for services rendered abroad?

Q: I have to submit a client’s income tax return for 2014 and I’m not sure if this income should be included or not.  By this income I mean the income he is generating from the company registered in RSA.  I am not sure as the client is not an RSA resident, but a Canadian resident. Therefore should the income (salary) be declared to RSA authorities or Canadian authorities?

Secondly, the company deducts PAYE every month on this salary.  So should the answer for the question above be that she should declare the income in Canada and not in RSA; does she still have to pay PAYE on the remuneration or will she take the gross amount to Canada and get taxed on it there.

PS: by foreign income I mean that he is a resident of Canada and generating income in RSA.  So this would be foreign (not Canadian) income.

A: In the additional information provided you have confirmed that the client is a resident of Canada.  You also confirmed that the income, earned after the client emigrated from the RSA, is in respect of services rendered outside the RSA.  On that basis, the income (salary) will not be gross income in the RSA.  It is an accrual to a non-resident that is not from a source in the RSA.  The source of income from services is where the services are rendered.  

The RSA employer (company) does not have to deduct employees’ tax from this as it is not income (as defined in the Income Tax Act).  

As indicated we can’t comment on the foreign tax laws, but we submit that Canada will be taxing this income.  The client should contact a tax practitioner in Canada to find out what her obligations are to report this income.  

The position may well not change when the withholding tax on services becomes effective in the RSA.   

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.


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