A taxpayer was a South African resident up to 22 October 2019. She formally emigrated on this date. She left South Africa on 3 July 2016 and has not been back since then. She wants to let her pension fund from when she was employed in South Africa, be paid out to her South African bank account. This will then mean that she will earn interest on the amount in her bank account and this will be a substantial amount of interest. Will this interest be exempt under section 10(1)(h)?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
We accept that the date of payment is after 3 July 2016. For ease of reference we quote section 10(1)(h) here: “There shall be exempt from normal tax … any amount of interest which is received by or accrues to any person that is not a resident, unless – (i) that person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the interest is received by or accrues to that person; or (ii) the debt from which the interest arises is effectively connected to a permanent establishment of that person in the Republic; …” The emphasis is on the underlined part – the period, relevant to the physical presence in the RSA, starts 12 months before the date that the interest is received (or accrues) to the foreign person. In the draft interpretation note on the withholding tax on interest, the following is stated (relevant to section 10(1)(h)): “The 12-month period concerned therefore ends on the day before the earlier of the date on which the interest is paid or becomes due and payable.”