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Concern about competitiveness of some SA companies

Friday, 22 May 2015   (0 Comments)
Posted by: Author: Amanda Visser
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Author: Amanda Visser (Moneyweb)

The proposed removal of relief from double taxation to South African companies offering services to foreign residents from South Africa, has raised concerns about the future competitiveness of companies delivering the services.

Double taxation is a serious hurdle for any company seeking to provide ongoing services on the continent. It could cause some services to be loss-making with companies withdrawing those services from some African countries, tax consultants warn.

Services rendered from South Africa to a foreign resident give rise to income from a South African source, which is taxable in South Africa. International treaties for the avoidance of double taxation prevent the foreign country from also taxing the same income.

If the foreign country also taxes the income, for whatever reason, the South African resident can claim a rebate in terms of Section 6quin of the Income Tax Act.

However, Finance Minister Nhlanhla Nene announced in his 2015 Budget Review that Section 6quin might be scrapped.  Since the announcement very little has been communicated about the reasoning behind the proposed scrapping, or how and when it will happen. 

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