Page 556 - SAIT Compendium 2016 Volume2

IN 63 (2) Income Tax acT: InTeRPReTaTIon noTes IN 63 (2)
8.2 Rebate for foreign taxes on South African-source service income [section 6quin(4)]
Subject to certain criteria and limitations, section 6quin provides a foreign tax rebate for foreign taxes paid on South African-source service income that is included in South African taxable income. Section 6quin(4) provides that any foreign tax which quali es for the section 6quin rebate must be translated to rand on the last day of the year of assessment in which the tax is levied and withheld or imposed at the average exchange rate for that year of assessment. See Interpretation Note No. 18 (Issue 3) dated 26 June 2015 ‘Rebate and Deduction for Foreign Taxes on Income’ for more detail on the rebate.
8.3 Rebate for foreign taxes on dividends [section 64N(4)]
A foreign dividend paid to a resident by a foreign company listed on the JSE* is subject to dividends tax to the extent the foreign dividend does not consist of a distribution of an asset in specie. Section 64N(1) provides for a rebate which must be deducted from the dividends tax payable on a foreign dividend as set out in the preceding paragraph if that foreign dividend was subject to foreign tax. The rebate for foreign taxes is determined in rand by translating the foreign currency amount using the same rate used to translate the foreigndividend. See Interpretation Note No. 18 (Issue 3) dated 26 June 2015 ‘Rebate and Deduction for Foreign Taxes on Income’ for more detail on the rebate.
9. Withholding of amounts from payments to non-resident sellers of immovable property [section 35A(5)]
Section 35A applies when any person purchases immovable property situated in South Africa from a non-resident and the amounts payable in aggregate exceed R2 million. Under section 35A the purchaser is generally obliged to withhold an amount from the purchase price paid to the non-resident. Section 35A(5) provides that when an amount has been withheld under section 35A(1) from any amount payable in a foreign currency, the amount so withheld must be translated to rand at the spot rate on the date that the amount is paid to the Commissioner.
Example 15 – Application of section 35A(5)
Facts:
A foreign company, resident in Country Y, sold immovable property located in South Africa to a resident on 20 August 2014 for Y$200 000. The purchase price was paid on 29 August 2014. The resident paid the withholding tax due under section 35A to the Commissioner on 8 September 2014.
Result:
The applicable withholding tax rate is 7,5% because the seller is a company. [Section 35A(1)] The applicable exchange rate is the spot rate on the date that the amount is paid to the Commissioner, that is, Y$1 = R17,0022.
The withholding tax amounts to R255 033 (Y$200 000 × 17,0022 × 7,5%). The following exchange rates are relevant:
Date:
20 August 2014 29 August 2014
8 September 2014
Exchange rate:
Y$1 = R15,1022 Y$1 = R16,0102 Y$1
= R17,0022
10. Taxation of foreign entertainers and sportspersons (section 47J)
Section 47B provides for a nal tax of 15% on an amount received by or accrued to a foreign entertainer or sportsperson for a personal activity exercised in South Africa. Under section 47D a resident is required to deduct or withhold the tax from the amount paid to a foreign entertainer or sportsperson for the activity. Section 47J provides that if any amount deducted or withheld is denominated in a foreign currency, the amount must be translated to rand at the spot rate on the date on which the amount was deducted or withheld.
11. Withholding tax on royalties (section 49H)
Section 49B provides for a withholding tax on royalties of 15% on any royalty that is paid or that becomes due and payable on or after 1 January 2015 by any person to or for the bene t of any foreign person to the extent that the amount is regarded as having been received or accrued from a source within South Africa under section 9(2)(c), (d), (e) or (f). The withholding tax on royalties must generally be withheld by the person making the payment to or for the bene t of the foreign person and paid over to the Commissioner.Section 49H provides that when an amount withheld by a person is denominated in a foreign currency the amount so withheld must, for the purposes of determining the amount to be paid to the Commissioner, be translated to rand at the spot rate on the date on which the amount was so withheld.
* The securities exchange operated by JSE Ltd.
Example 16 – Application of section 47J
Facts:
A singer resident in Country Z performed in South Africa in December 2014. A South African promoter paid the singer an amount of Country Z $150 000 for four performances on 15 December 2014.
The spot rate on 15 December 2014 was Country Z $1 = R16,1013.
Result:
The withholding tax amounts to R362 279 (Country Z $150 000 fee × 16,1013 exchange rate × 15% nal tax rate).
548 saIT comPendIum oF Tax LegIsLaTIon VoLume 2