FAQ - 5 February 2015
04 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. How to disclose a taxpayer’s emigration on a tax return?
Q: My client has been working abroad for several years and has had no South African income. Nil returns have been submitted and assessed up to 2014. He has just inherited a substantial sum in assets and cash from his late mother’s estate. He is also a beneficiary of a family trust which the trustees have decided to wind up, distributing all the assets to the two main beneficiaries, my client and his sister. Half the share portfolio of the trust was sold and the proceeds distributed to my client who becomes liable for the capital gains tax on that gain. He has reinvested some of that cash in shares and has acquired other shares as a distribution from his late mother’s portfolio. As he has now decided to relocate permanently to Australia he should revalue his portfolio and accept liability for CGT on any gains from the base value, after which, as a non-resident, and further realised gains will be exempt.
My query is how exactly do I go about declaring this change to non-resident status and recording the CGT event?
A: As noted section 9H of the Income Tax Act will deem the disposal to be the day before ceasing to be a resident and ends the year of assessment on that day.
On SARS’ Efiling you can request a 2015 tax return and you will receive a pop up as to whether the reason for the return is emigration as shown below. You can then proceed to disclose the emigration and CGT event once the relevant return has been created in the wizard.
2. Procedure to rectify an incorrect tax return submitted to SARS
Q: My client completed his own ITR12 for 2014 and declared interest of R400 000, but the R400 000 is actually SA dividends that he received. He was assessed in November 2014. Please indicate the procedure that I need to follow to correct his return.
A: You can actually submit a corrected return where you’ll be able to fix this error.
Please click here to see relevant details.
3. Are amounts contributed to a foreign retirement fund deductible for SA income tax purposes?
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 these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.