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What You Need to Know About Section 6quin

Monday, 13 April 2015   (0 Comments)
Posted by: Author: Dawid van der Berg
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Author: Dawid van der Berg

Dawid van der Berg explains the core concessions to keep in mind when dealing with section 6quin.

In terms of section 6quin(1) of the Income Tax Act No. 58 of 1962 (the Act), a resident is entitled to deduct the section 6quin rebate in instances where an amount forms part of the taxable income of that resident and is from a source within the Republic. This concession applies where the amount is in respect of services rendered within the Republic. In addition, an amount of tax in respect of the aforementioned amount must have been levied, inter alia, by any sphere of government of any country other than the Republic.

Section 6quin(3A) provides that the section 6quin rebate may not be deducted if the resident referred to above does not submit a duly completed return to the Commissioner within 60 days from the date on which the amount of tax is withheld. The return must show that the amount of tax was actually levied and withheld by the relevant foreign government. 

In terms of section 1 of the Tax Administration Act No. 28 of 2011 ("TAA”), ‘return’ includes "a form, declaration, document or other manner of submitting information to SARS...”. In relation to the section 6quin rebate, the relevant return is a FTW01 – Return of Foreign Tax Withheld and must be accompanied by all supporting documents including documentary proof in respect of foreign taxes paid (for example, assessments, receipts and tax certificates).

Practically, the 60 day time limit to submit a FTW01 – Return of Foreign Tax Withheld causes a problem for South African taxpayers as foreign Revenue Authorities are hardly ever forthcoming with assessments, receipts or certificate to prove the amount of tax actually levied and withheld. As a result, South African taxpayers often end up having to forfeit any section 6quin rebate they may otherwise have been entitled to.

Section 25 of the TAA, which deals with the submission of returns, states in subsection (1) that a person must submit a return required under a tax Act or by the Commissioner in the prescribed form and manner by the date specified in the relevant tax Act. 

Section 25(6) of the TAA provides that SARS may extend the time period for filing a return in a particular case, in accordance with the procedures and criteria in policies published by the Commissioner. To date no such policies have been published by the Commissioner. However, it can be argued that section 25(6) implies that the Commissioner must be reasonable when considering such requests for extension.

Based on the above argument, South African taxpayers can upon furnishing reasonable grounds request SARS to grant extension for a reasonable time to submit a FTW01 – Return of Foreign Tax Withheld return in order to avoid forfeiting any section 6quin rebate to which such taxpayer may otherwise have been entitled.

This article first appeared on the March/April edition on Tax Talk.



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