All foreign companies with SA sourced income must file tax returns for 2015
24 June 2015
Posted by: Author: Webber Wentzel
Author: Webber Wentzel
SARS has released the Notice to Furnish Returns for 2015 setting out who must submit an income tax return for the 2015 year of assessment.
The 2015 Notice differs in three respects to the 2014 Notice:
Any foreign company or trust with South African sourced income must file a tax return
This is the most significant change. In the past, a foreign entity was only obliged to file an income tax return if it:
- carried on a trade through a "permanent establishment" in South Africa;
- derived a capital gain sourced in South Africa, or
- had South African sourced "service income".
The first two tests remain. However the third test has been amended to replace the reference to "service income" with any "income".
"Income" is defined in the Income Tax Act, No. 58 of 1962 to mean gross income less exempt income. A foreign company therefore need not file a return if its only South African sourced income is exempt from income tax and the other tests do not apply.
Residents holding foreign assets valued at over ZAR 200 000 are obliged to file
The Notice increases the threshold at which the value of foreign assets held by a resident individual will trigger a tax filing obligation. The threshold has increased from ZAR 100 000 to ZAR 200 000.
Individuals earning amounts of less than ZAR 350 000, that are subject to PAYE, are not obliged to file
Where an individual only earns remuneration which has been subject to PAYE, he or she need not file a return if the amount of that remuneration is less than ZAR 350 000. This threshold was previously ZAR 250 000.
The revised filing requirement for non-resident companies and trusts will impact many foreign investors who have neither a permanent establishment nor capital gains in South Africa and did not previously need to prepare and submit tax returns. Such companies will need to carefully consider whether they have South African sourced income or not during the 2015 year of assessment, which is often a very technical analysis.
Increased scrutiny from SARS can be expected with respect to foreign companies filing for the first time, particularly in relation to the purported non-existence of a permanent establishment.
This article first appeared on webberwentzel.com.