FAQ - 2 December 2015
02 December 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. How do I claim foreign tax that’s been
Q: I have a client who provides training to a company in
Botswana. My client’s company is a SA registered company and the
training was carried out in Botswana.
They have deducted 10% withholding tax
from the total amount invoiced. They have issued the client with an
ITW9 (Certificate of Tax Deductions from payments). Does the client
have to wait to claim the amount withheld on his tax return or is there a way
to claim a refund prior to this?
A: There is no refund of the foreign tax. The
client would be entitled to a rebate, on assessment, in respect of the foreign
tax paid. From the information provided it is not clear if section 6quat
is likely that it is section 6quin applies – specifically subsection
(3A). The Interpretation note (Issue 3 issued on 26 June 2015) explains
section 6quin(3A) as follows:
effect from 1 July 2013 a resident who wishes to claim a foreign tax rebate
under section 6quin on foreign taxes levied by a foreign government with which
South Africa has a tax treaty and which have been withheld from payments made
to the resident, must submit a return to SARS.
return must be submitted to SARS within 60 days from the date on which the
foreign tax is withheld. The return must be made on the "Declaration of foreign
tax withheld – Section 6quin of the Income Tax Act (FWT 01)” form which is
available on www.sars.gov.za. – see 7.6.
Failure to submit the return within the 60-day period will result in the
resident not being able to claim a section 6quin rebate as a deduction from
who are unable to obtain all of the required supporting documentation within
the 60-day period must submit the FWT 01 form within the 60 day period as
required together with a letter explaining what supporting documentation is
outstanding, the reason it is outstanding and the date by when it will be
will allow SARS to consider the appropriateness of the reasons for the delay in
submitting all of the required documentation within the time period specified
in section 6quin(3A) and whether the return is still regarded as submitted even
though all the required documentation has not been submitted. It is critical,
however, that the return be submitted within the time period specified in
2. Can a
company claim input VAT on directors’ cell phone contracts?
Q: Directors of companies
have cell phone contracts in their personal name but use the contract (airtime/data)
mainly for business purposes. Can these invoices be used to claim input vat and
can they be used as expenses i.e. offset against Income?
A: The principle here is that the
services must have been ‘acquired by the vendor’ – see the definition of ‘input
tax’ in section 1(1) of the Value-Added Tax Act. This concept is not
defined and therefore takes its normal meaning.
"A vendor, is entitled to make a
deduction of input tax on expenses incurred in the course or furtherance of
his, her or its enterprise even if the tax invoice is issued in the name of his
employee, provided that:
- the registered vendor pays for the cost on the account
or, alternatively, reimburse the employee;
- the registered vendor retains the tax invoice which
was issued to the employee; and
- the registered vendor maintains
sufficient records to adequately identify the nature of the costs incurred.
The employee acts in the capacity of
agent for the vendor in terms of section 54(2).”
Note, the above is an extract from an
old SARS VAT Ruling, but essentially the input tax can only be deducted in the
hands of the person who acquired the services as principal.
SARS has published the following
guidelines as to the difference between an agent and a principal (see
Interpretation Note No 42, para 4.2): A principal will become the owner of the
goods or services acquired on his behalf by the agent; the principal may alter
the nature or value of the supply; the total sales represent the principal's
turnover and the mark-up is his profit, while an agent normally earns a
commission or fee and the principal declares the gross sales as income for
income tax purposes.
The vendor, in your case, bears the
onus to prove that the services supplied to the directors when the phones were
used for ‘business purposes’ as you say. It may be problematic as the
service provider is actually providing the service to the director.
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 does 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.