BPR 156 dealt with the question of whether (or to what extent)
a pension annuity and a retirement lump sum benefit will be taxable
in South Africa, if it is received by or accrues to a person who is
not a resident of South Africa, from a South
African registered pension fund.
Prior to 2001, residents and non-residents were taxed based on
the source of their income; essentially their income was taxed in
South Africa (SA), if it originated in SA. Since 2001, SA has
recognised the residence basis of taxation, which means that if a
person is a resident in SA, he or she is taxed in SA on their
worldwide income, regardless of its source. The source based system
of taxation is, however, still applicable to non-residents in SA.
Thus, persons who are not resident in SA, will only be subject to
tax in SA on income sourced in this country. Double Tax Treaties
(DTT's), which have been concluded by SA with various
countries, regulate the taxation of income earned in one state and
taxed in another, to ensure that double taxation is avoided.
Section 9 of the Income Tax Act, No 58 of 1962 (ITA) determines
the source of various types of income. Specifically, s9(2)(i)
treats an amount as being from a source in SA, if it is a pension
or annuity and the services in respect of which that amount was
received or accrues, were rendered within SA. Section 9(2)(i)
further provides that the amount received or accruing, must be
apportioned where the services were rendered partly inside and
partly outside SA.
The facts in this instance were that the Applicant was employed
by one company in a group of companies, which company was
registered in SA. In 1999, the Applicant's employment with the
latter company was terminated and he left SA to join a foreign
company in the group, and then became ordinarily resident in that
foreign country. The Applicant made contributions to a registered
South African pension fund during his term of employment in SA and
subsequently continued to contribute to this fund, despite having
lost resident status in SA as a result of his move abroad.
Essentially, regarding the question submitted for ruling, SARS
ruled based on s9(2)(i) of the ITA, providing that the portion of
the pension annuity and retirement fund lump sum benefit received
or accrued from a South African source (relating to services
rendered in SA), would be included in the Applicant's gross
income in SA in terms of paragraphs (a) and (e) of the 'gross
income' definition. Therefore, the pension and retirement fund
pay-out would have to be apportioned and only the portion relating
to the time during which services were rendered by the Applicant in
SA, will be taxed in SA. The remaining portion will be taxed based
on its source.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The expansion of the West African regional market to foreign investors, and the search for emerging markets has led to a continuous increase in business mobility and cross border investments with Nigeria.
Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
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