My client is working in China and they are giving him the option to deduct the tax or he must be responsible for his own tax. I would like to make sure that I understand how the calculations will be ragdring SA citizens receiving foreign income. The clien
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Because of your reference to section 10(1)(o)(ii) (the R1 million that applies from 1 March 2020) in your request, we accepted that the amounts constituted “salaries, wages and other similar remuneration derived by a resident of a Contracting State (the RSA) in respect of an employment … is exercised in the other Contracting State (China). In other words, it is not income derived “in respect of professional services or other activities of an independent character. That is why article 15 then applies.
Note, if there is an RSA employer, there is no option to NOT withhold employees’ tax (applicable next year). We don’t comment on foreign tax legislation.
The person is then also someone “who, under the laws of China, is liable to tax therein by reason of his domicile, residence …” The client is also not a person who is deemed to be exclusively a resident of another country (China) for purposes of the application of any agreement entered into between the governments of the Republic (RSA) and that other country (China) for the avoidance of double taxation.
If the remuneration is R1,4 million and the exemption is R1 million, the taxpayer's 'income' will be R400 000 (gross income less exempt amount). From that, the taxpayer will make the qualifying deductions, such as retirement contributions, to arrive at the taxable income. The tax tables are then applied to that - it will not be at 45%.
The taxpayer is entitled to the section 6quat rebate in respect of the foreign taxes – the country of residence gives relief for the double tax. Note, the section prescribes the order and an apportionment.