A taxpayer receives an annuity from Old Mutual, but the amount needs to be taxed in the UK due to a double taxation agreement. However, the amount already reflects on the IRP 5. The amount should not be taxed on his return and should be exempt. Kindly advise on the correct course of action.
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The UK would only have a sole right to tax, or the RSA can’t tax, if the person is a resident of the UK.
Article 17, of the RSA / UK treaty, deals with pensions, other than from Government, and reads as follows: “Subject to the provisions of paragraph 2 of Article 18 of this Convention: (a) pensions and other similar remuneration paid in consideration of past employment, and (b) any annuity paid, to an individual who is a resident of a Contracting State shall be taxable only in that State.
” Article 17 therefore gives a sole taxing right to the country where the person is a resident. It is important to determine whether the person was (or is) deemed to be exclusively a resident of the RSA in terms of the DTA between the RSA and the UK.
We say this as taxpayers normally applies for a directive to not have the fund withhold any employees’ tax from the monthly payments. The fund can also not be requested to amend the IRP5 and we suggest that an objection is made to the assessment.