Repeal of withholding tax regime Section 51A-H. I need to know exactly how the reportable arrangement works. What forms must be completed and what supporting documentation needs to be provided and where or how do we do this? Is it also on efiling?
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The withholding tax on service fees (Part IVC of Chapter II of the Income Tax Act, 1962) was hereby repealed by section 60 of Act No. 15 of 2016 (Taxation Laws Amendment Act, 2016). It came into operation on 1 January 2017.
There are no guides available on the SARS website – the guide on the SARS website is very old.
The form to complete is the RA 01 form (available on the SARS website). It has also not been updated with the new information issued in the last semester of last year. One must therefore have regard to the notices that were published last year and that relate to reportable arrangements.
SARS published notice No 140 in the Government Gazette (No 39650) on 3 February 2016, in terms of section 35(2) of the Tax Administration Act. Among other things, the notice lists an additional reportable arrangement that was not included in previous notices.
The following arrangement is now a reportable arrangement:
An arrangement for the rendering of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services to a:
South African resident; or
a non-resident having a permanent establishment in South Africa,
and in terms of which arrangement:
a non-resident was, is, or is anticipated to be physically present in South Africa in connection with or for purposes of rendering the services (not being an employee, agent or representative of the person to whom the services are rendered); and
the expenditure incurred or to be incurred in respect of the services exceeds or is anticipated to exceed R10 million, and does not qualify as ‘remuneration’ for employees’ tax purposes.
With regard to the physical presence, the exact words in the Regulation are as follows:
“a person that is not a resident or an employee, agent or representative of that person—
(aa) was or is physically present in the Republic; or
(bb) is anticipated to be physically present in the Republic,
in connection with or for purposes of rendering those services”.
It does not define the words ‘physically present” and the expression also doesn’t have a meaning which has been assigned in the Income Tax Act. It must therefore take its ordinary meaning. There is no reference to a branch in the Notice.