Q: I have a client
who is a permanent SA resident and has received a royalty from a book she
wrote. No tax has been deducted from
this royalty. Now we would like to pay provisional tax on this royalty. What percentage must we pay to SARS and how
do we show this on her provisional tax form, bearing in mind that she also gets a pension?
A: Royalties payable to a SA
resident constitute gross income and will be fully taxable, unlike royalties
payable to a non-resident by an SA resident, which is subject to a fixed
percentage withholding tax (which is a final tax). In respect of the
provisional tax estimate, you would in our view have to determine the "profit”
(i.e. taxable income), therefore should there be any tax deductible revenue
expenditure against the royalty income this must be taken into account.
You would then proceed
to calculate the normal tax liability in the usual way.
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.