Worldwide Income

[John Bertrand]

Hi all,

I know this topic has been discussed previously, but I've never been able to get a clear decision on it. I thought I'd find out what other people are doing.

I'm a South African citizen living in Australia. We're permanent residents and have been here for 4 years. We're also residents for tax purposes (we haven't left Australia for more than 3 weeks in the 4 year period).

We have been lodging our SA tax returns every year in order to keep our SARS account active (we also have RA's in SA which we might want to bring over a later date).

The question is, on our SA return, do we need to declare our worldwide income (eg. Aus income)? I know we need to declare any SA income, but what about worldwide income?

Capitax says yes. All other tax consultants I've spoken to say no. No one seems to know for sure.

Anyone in a similar circumstance? What have you been doing?

Thanks!

John.

[ronfire]

Hi all,

I know this topic has been discussed previously, but I've never been able to get a clear decision on it. I thought I'd find out what other people are doing.

I'm a South African citizen living in Australia. We're permanent residents and have been here for 4 years. We're also residents for tax purposes (we haven't left Australia for more than 3 weeks in the 4 year period).

We have been lodging our SA tax returns every year in order to keep our SARS account active (we also have RA's in SA which we might want to bring over a later date).

The question is, on our SA return, do we need to declare our worldwide income (eg. Aus income)? I know we need to declare any SA income, but what about worldwide income?

Capitax says yes. All other tax consultants I've spoken to say no. No one seems to know for sure.

Anyone in a similar circumstance? What have you been doing?

Thanks!

John.

Hi John

I have been doing the same thing for the past 5 years after first speaking with a friend of mine who is a tax accountant here in Perth. Although I'm an accountant myself, I decided to play it safe since income tax is not something I do on a regular basis in my work.

For tax purposes, you're not resident in South Africa so you are only required to declare your income from South African sources in your SARS tax return. Ergo, no need to declare any Aus income in your SA return.

This is a link to a guide on the SARS website: http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G13%20-%20Tax%20Brochure%20for%20Non%20Residents%20-%20External%20Guide.pdf

It confirms that only income from sources in or deemed to be in SA are taxable in the hands of non-residents for tax purposes.

Of course, this being tax there's bound to be some obscure clause somewhere that may be an exception. A competent tax accountant or lawyer will be able to advise on those.

Edited October 19, 2013 by ronfire

[John Bertrand]

Thanks Ronfire!

I read a few sections of the brochure, and section 8 seems to be the relevant section (refers to income sourced in South Africa). It doesn't specifically say, however, whether or not you should declare income sourced outside of South Africa, if you're a non-resident. I think it's just implied.

I will probably lodge the return declaring only South African sourced income. I know what you mean about obscure clauses in tax law though, but I have never been able to find a tax consultant/lawyer in South Africa who is completely certain about this issue. Those I have spoken have just gave their "best guess", which is unacceptable in my view.

Thanks for your help

John

[ronfire]

Thanks Ronfire!

I read a few sections of the brochure, and section 8 seems to be the relevant section (refers to income sourced in South Africa). It doesn't specifically say, however, whether or not you should declare income sourced outside of South Africa, if you're a non-resident. I think it's just implied.

I will probably lodge the return declaring only South African sourced income. I know what you mean about obscure clauses in tax law though, but I have never been able to find a tax consultant/lawyer in South Africa who is completely certain about this issue. Those I have spoken have just gave their "best guess", which is unacceptable in my view.

Thanks for your help

John

No problem!

As far as taxability of income based on residence is concerned, it's pretty straightforward in most cases, as far as I can see. The only difficulty is that non-residence is not explictly defined, but since residence is, it's not difficult to assess non-residence on that basis. If you've been living here for 4 years, then applying the residence test would be very straightforward.

If you look at page 9 of the guide, in the first section "Tax basis of South Africa", the bit at the end might be helpful in this regard.

[Hugo2]

Hi all,

I know this topic has been discussed previously, but I've never been able to get a clear decision on it. I thought I'd find out what other people are doing.

I'm a South African citizen living in Australia. We're permanent residents and have been here for 4 years. We're also residents for tax purposes (we haven't left Australia for more than 3 weeks in the 4 year period).

We have been lodging our SA tax returns every year in order to keep our SARS account active (we also have RA's in SA which we might want to bring over a later date).

The question is, on our SA return, do we need to declare our worldwide income (eg. Aus income)? I know we need to declare any SA income, but what about worldwide income?

Capitax says yes. All other tax consultants I've spoken to say no. No one seems to know for sure.

Anyone in a similar circumstance? What have you been doing?

Thanks!

John.

Good day to all

yes the topic has been dealt with before and I will gladly give you the short rundown:

1. The guide quote is not truly relevant as it is should have had a second buy off line: For the immigrant

2. The only real relevance of the guide is in this sentence: but does not include any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the government of South Africa and that of the other country for the avoidance of double taxation.

3. So guess what the act is not where you will find the answer and Captax may not have been correctly quoted. I have seen lots of their work and they normally spot on

4. So in terms of the treaty (and I now generalise, you should obtain a written handrail from a registered practitioner as this will shield you against any future SARS attack. I can help for those in need) only once you have a PR or are married to someone that meets the criteria (a 457 permit holder is normally always RSA tax resident!!! Note please) are you tax resident Australia in terms of the treaty. Yes, I know what ATO pages says, but treaty overrides, I guarantee you that.

5. Once you are tax resident Australia you can apply treaty tiebreaker and if you have a permanent home in Australia but NONE in SA, you are exclusively tax resident in Australia and thus by definition tax NON-resident in SA.

6. Do not, the RSA/Australia treaty lacks the habitual home test, therefor your SA holiday home permanently available to you will ensure you fail the above test and we do not have an indicative answer for you, as yet.

7. If you have a holiday home in SA, a homestead on a family farm and an Australian family home, the next test is center of vital interest which is a very complex topic but in short an undefined mix of money, employment, location of family and location of wealth. OK, examples: If you have all your family with you in Australia but you are employed by an SA company (say SAA) and you have not formally emigrated ie most of your personal accessible wealth is still in SA, you are SA tax resident. Same scenario but you are based in Australia and fly for Cathay Pacific, you probably tax resident Australia as your income stream and family is both Australian and your personal wealth of less concern. Wide statement but formal emigration and RA extraction will ensure you receive a TRC (tax residency certificate from ATO and a tax emigration clearance from SARS.

8. If center of vital interest is not the indicative issues, nationality will dictate and failing that a SARS/ATO ruling must be obtained.

The most important issue: The year before you commence NOT declaring worldwide income to SARS, you have to show a CGT event reflecting your formal emigration. Failing this has dire consequences but do remember there is only CGT (on tax emigration) on shares etc., nothing on cash, nothing on RA's and on immovable property the CGT is postponed until sold.

I address several parts of the wider topic in my blog www.hugovanzyl.co.za and then also on www.taxconnections.com

Greetings to all