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Does a non-resident person over 65 qualify for a medical deduction?

Tuesday, 01 July 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 01/07/2014.

Q: Does a Non Resident Taxpayer over 65 get the medical deduction?

A: Our guidance assumes that with "non resident taxpayer” you mean that the taxpayer is deemed to be a resident only of Australia – refer to article 4(3) (in the protocol).  We are not certain why the capital why it is believed that the capital gain on the sale of the shares is a taxable one.  We assume the listed shares are the ones envisaged in paragraph 2(2) of the Eighth Schedule.  We are aware that article 13(5) gives sole taxing rights to the RSA, but submit that it does not apply – article 13(4) deals with the paragraph 2(2) assets.  

Please note that the taxable income would not include the dividends.  

We agree that the taxpayer will be entitled to make the section 18 deductions.  

In SARS’s Interpretation Note 18 (we referred to issue 2 and not the draft one) it is explained as follows:

In determining the taxable income derived from foreign and South African sources respectively, any deductions sought under the following sections must be apportioned on a pro rata basis between taxable income derived from local and foreign sources before taking into account the relevant deductions:

  • 11(n) (retirement annuity fund contributions),
  • 18 (medical and dental expenses), and
  • 18A (donations to certain organisations)

(Paragraph (i) of the proviso to section 6quat(1B)(a)).

As a result of taxable income including a taxable capital gain, any deduction under sections 18(2)(c)(ii) and 18A respectively must be calculated by taking into account any taxable capital gain forming part of taxable income. 

Whilst it is not applicable to the question raised, it confirms that the deduction can be made.  



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