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Tax implications of a SA resident receiving funds from a non-resident partner to invest in property

Monday, 09 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: I have a client whose living partner is a foreigner.  If he transfers money from overseas into her bank account to invest SA property, are there any tax implications towards my client who is a South African citizen?

A: We assume the property will be purchased by the non-resident.

We are of the view that the mere use by the non-resident of the taxpayers bank account does not result in an amount being received or accrued for income tax purposes as she has not "beneficially received” the amount (OCHBERG v COMMISSIONER FOR INLAND REVENUE 5 SATC 93) as not every obtaining of physical control of money results in an amount being "received (Commissioner for Inland Revenue v Genn and Co (Pty) Ltd [1955] 3 All SA 382 (AD)).

It should however be noted that exchange control regulations are different for no-residents than residents and the non-resident would have to make sure that the relevant declarations are made to ensure any funds can later be removed from SA without restriction. Furthermore on disposal of the fixed property section 35A of the Income Tax Act may apply as to the withholding tax imposed on non-residents on disposal of SA based fixed property. 

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.



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