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Foreign entities deriving income from South Africa must register as taxpayers

02 September 2015   (0 Comments)
Posted by: Author: Douglas Gaul
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Author: Douglas Gaul (Grant Thornton Johannesburg)

It has long been a requirement that a non-resident company, trust or other juristic person must file a tax return if it carried on a trade through a permanent establishment in South Africa, or derived any capital gain from a South African source.

Every year, the requirements for submitting income tax returns are published by way of a notice in the Government Gazette and it is interesting to note that the requirements for submitting returns for the 2015 year now include non-resident companies, trusts or other juristic persons that derive income from a source in South Africa.

This means for example, that if a foreign entity sends an employee to South Africa to render services here, and the entity invoices a South African resident for these services, the foreign entity may be required to submit a tax return to SARS in respect of its South African-sourced income. This, despite the fact a double taxation agreement may otherwise have meant that the income would be exempt, simply because it does not have a permanent establishment here.

It is uncertain whether any consideration was given to the practical implications related to this requirement. For example, the foreign entity will have to register as a taxpayer before it is able to file a tax return, which in itself is no easy feat and requires amongst other stringent prerequisites, including the appointment of a public officer with a South African address.

In view of the complications, it remains to be seen to what extent non-resident entities will comply, assuming they are even aware of the need to do so. 

This article first appeared on gt.co.za.


WHY REGISTER WITH SAIT?

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.

MINIMUM REQUIREMENTS TO REGISTER

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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