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FAQ - 29 June 2016

Tuesday, 28 June 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. What estate duty exemptions apply to offshore assets held prior to becoming a South African tax resident?

Q: Client was born in UK, raised and worked there until she retired and moved to South Africa. Client has been a South African resident for years. Client still has UK properties, bank accounts and investment portfolios based in the UK at the time they moved to South Africa. Client passed on 1/6/2016. We need clarity on whether there is any exemption to Estate Duty calculation on the offshore assets held before client become a RSA tax resident.

A: For purposes of the guidance that follows, we accepted that the treaty (the estate duty one) between the RSA and UK doesn’t provide differently.  

The Estate Duty Act doesn’t provide for an exemption with respect to the assets mentioned.  Section 3(2)(c) – (h), however, provides that certain property is not included in the estate (and effectively not subject to the tax (if the dutiable amount is positive), but doesn’t apply in this instance.  In other words, these assets are included in the property of the estate.  It then is section 4(e) that provides that the net value of the estate must be determined by making the following deductions from the total value of all property included therein in accordance with section 3: 

The amount included in the total value of all property of the deceased as representing the value of any right in or to property situate outside the Republic acquired by the deceased: 

(i) before he became ordinarily resident in the Republic for the first time; or 

(ii) after he became ordinarily resident in the Republic for the first time, by: 

(aa) a donation if at the date of the donation the donor was a person (other than a company not ordinarily resident in the Republic; or 

(bb) inheritance from a person who at the date of his death was not ordinarily resident in the Republic; or 

(iii) out of the profits and proceeds of any such property proved to the satisfaction of the Commissioner to have been acquired out of such profits or proceeds.  

As it was not required we didn’t comment on the deduction of the normal tax on the capital gain implications of these assets.  

2. Can I backdate a VAT application to claim the VAT on a property purchased?

Q: A company purchased a property in August 2015 with the view of it being a rental property. At the time of the transaction the company was not vat registered, and would like to now register for VAT to claim the VAT paid on the property purchase. Should we make the VAT liability date August last year on the VAT application or should the VAT liability date be the current period that we are in? 

A: Based on the information provided the requirements of section 23(1) (a) or (b) didn’t apply in August 2015.  In other words, section 23(4) (b) doesn’t apply.  The company should then have applied for registration under section 23(3) and SARS then determines the effective date of registration.  

We are not sure why you want to backdate the registration in order "to claim the VAT paid on the property purchase”.  We accept it is not a scheme for obtaining undue tax benefits – section 73.  The registration of a person as a vendor is a tax event envisaged by section 18(4), if the goods or services acquired before the effective date will subsequently be applied for use in the course of making taxable supplies.  The requirement (in that section) is that "tax has been charged in respect of that supply.”  If it was not acquired from a vendor section 18(4) (c) will apply – second hand goods.  

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 do 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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