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Are amounts contributed to a foreign retirement fund deductible for SA income tax purposes?

03 February 2015   (1 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a client who is now a permanent resident in SA; however she is still paid in US dollars. The query is my client contributes to a retirement account in the states. $ 17 500 of her income goes to this, do I declare the $17 500 under amounts exempt, foreign pension, or will it fall into her taxable income. She was not out of the country for 60 consecutive days during the tax year, so she does not qualify for the income earned while she was out the country for this year.

A: It is our understanding that the contributions to the Roth 403(b) fund are made from after tax monies and is a fund in the USA. To claim a deduction for retirement contributions made by employers in terms of section 11(k) & (n) ITA, the relevant fund must be approved by SARS and usually must be created by law in SA.

In our view the fund will not be an "approved fund” and therefore the taxpayer would not be entitled to a deduction. As a tax resident in SA she will be taxed on her worldwide income and her full gross income earned must be disclosed as income in the return and not just the net amount payable after deductions or contributions.

In respect of the s10(1)(o)(ii) ITA exemption for foreign employment, please note that she does not have to be working outside SA for 183 days and 60 days continuous in the tax year, but in any 12 month period  which can be over more than one tax year.

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.


Hugo van Zyl says...
Posted 08 March 2015
If "states" refers to a contribution to a USA registered fund, then I suggest the answer above may just be incorrect. See the USA treaty which reads: Contributions paid by or on behalf of SA tax resident natural person, to the USA registered plan during the period that he performs such services in South Africa, shall be deductible (or excludible) in computing his taxable income inSouth Africa. Any benefits accrued under the plan or payments made to the plan by or on behalf of his employer during that period shall not be treated as part of the employee's taxable income


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.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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