What is obligations of Employer w.r.t. the tax of their employees in Mozambique delivering a service to a Mozambique client on a CCTV Monitoring contract? Does this contract create a permanent establishment for the employer in Mozambique? The employees s
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
The current practice generally prevailing is that the potential for an exemption under section 10(1)(o)(ii) of the Act does not automatically waive the liability of an employer to deduct employees’ tax in terms of the Fourth Schedule to the Act. An employer that is satisfied that the provisions of section 10(1)(o)(ii) will apply in a particular case may, however, elect not to deduct employees’ tax in a particular case. Where it is found that the exemption was not applicable the employer would be held liable for the employees’ tax not deducted as well as the concomitant interest and penalties.
An exemption under the provisions of section 10(1)(o)(ii) does not mean that an employer or an employee is absolved from liabilities under the Unemployment Insurance Contributions Act or the Skills Development Levy Act. These two Acts do not provide for the same exemption.
In terms of article 5(3), of the agreement between the RSA and Mozambique, the term “permanent establishment” likewise encompasses:
(a) …
“(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by an enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the Contracting State for a period or periods exceeding in the aggregate 180 days in any twelve-month period commencing or ending in the fiscal year concerned;…”
It is therefore not dependent on whether or not the taxpayer (employer) has a fixed place of business in Mozambique (as envisaged in article 5(2)), but whether the activities
In ITC 13276, Judge Vally considered the meaning of the words “includes specifically” as used in another treaty. We submit that “likewise encompasses” must take the same interpretation that the Judge gave to “includes specifically”.