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FAQ - 2 December 2015

Wednesday, 02 December 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. How do I claim foreign tax that’s been withheld?

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 applies.  

It 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:

"With 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.

The 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 – 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 normal tax.

Taxpayers 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 submitted.

This 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 section 6quin(3A).”

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.  



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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