What is the tax implication for a taxpayer working in Zambia and gets paid from Mauritius. What is the new law with regards to expats? Taxpayer is 70 years of age on contract basis, will be outside of SA for more than 92 consecutive.
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
For purposes of the guidance that follows it was accepted that the individual concerned is a resident of the RSA. According to subparagraph (g), of paragraph 1 of Article II, in the Agreement between the RSA and Zambia “unless the context otherwise requires “resident of the Union” and “resident of the Federation” mean respectively any person who is ordinarily resident in the Union for the purposes of the Union tax and not ordinarily resident in the Federation for the purposes of the Federal tax and any person who is ordinarily resident in the Federation for the purposes of the Federal tax and not ordinarily resident in the Union for the purposes of the Union tax”. The union refers to the RSA and the Federation to Zambia.
In terms of Article IX (1), “an individual who is a resident of the Union shall be exempt from Federal tax on profits or remuneration in respect of personal (including professional) services performed within the Federation in any year of assessment if –
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he is present within the Federation for a period or periods not exceeding in the aggregate 183 days during that year; and
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the services are performed for or on behalf of a person resident in the Union; and
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the profits or remuneration are subject to Union tax.”
On the basis of our assumption, we agree with your view. Any tax levied on the income by Zambia, will qualify for the section 6quat rebate in the RSA – i.e. the withholding tax that is deductible from payments to a payee who is not in business in Zambia but renders a service to a person carrying on business in Zambia.