Is rental income from Canada earned by an SA tax resident in taxable in RSA?
30 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Is the net
income (rental income minus expenses) from a flat in Canada taxable in South
My client has a flat in Canada which he rents out. The
rental income is paid in his Canadian account. There is no tax deduction on the
income in Canada.
A: The matter is
dealt with in Article 6 of the RSA / Canada treaty. We accept that with "SA citizen” you mean
that the individual is ordinarily resident in South Africa.
In terms of Article 6.1 "income derived by a resident of a
Contracting State (your client who is a resident of the RSA) from immovable
property (including income from agriculture or forestry) situated in the other
Contracting State (in Canada in this instance) may be taxed in that other State
(Canada).” Article 6.3 provides that "the provisions of paragraph 1 shall apply
to income derived from the direct use, letting or use in any other form of
immovable property and to income from the alienation of such property.”
From the above it is clear that both countries have a right
to tax the income - the RSA based on the definition of gross income. If tax is payable in both countries a rebate
will be available (in terms of section 6quat in the RSA) to the taxpayer.
We can’t comment on the tax or rebates in Canada. The fact that "there is no tax deduction on
the Income in Canada” is irrelevant as there is normally no withholding tax on
rental income. You also stated that the
money is not being repatriated to the RSA which may be another reason.
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.