My customer lives in South Africa but works full time for a company in New Zealand where he pays tax (I do have the NZ IRD) and uses a NZ bank account. He transfers money to his SA bank account as needed. He travels to NZ from time to time. He has a disab
Important:
This answer is based on tax law year ending 28 February 2019.
Answer:
There is a double taxation agreement (we’ll refer to a treaty) between the two countries.
We accept that the fact that the individual “lives in South Africa” implies that he (or she) is still ordinarily resident in the RSA. You state that the individual is not “able to get residency’ – we assume in New Zealand.
We then accept that the individual is not deemed to be exclusively a resident of New Zealand – this is determined by applying article 4 of the treaty between the two countries. That would entail determining if a permanent home is available to the individual in one of the countries only. If not, and if a permanent home is available to the individual in both countries, the individual is deemed to be a resident solely of the country with which the individual’s personal and economic relations are closer (centre of vital interests).
You stated that the ‘income’ is subject to tax in New Zealand and we accepted, that under Article 14 of the treaty, the RSA has a right to also tax the income. The individual will then have been a provisional taxpayer for the 2018 year of assessment and the ‘income’ is declared in the ITR12, but you must answer “Y” to the following two questions:
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Did you receive any form of remuneration for foreign services rendered?
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Was any portion of this foreign services remuneration subject to tax in another country?
It will open up the relevant part of the return where the information is captured. The foreign tax suffered is captured next to code 4110: Foreign tax credits on other foreign income.
The translated to the currency of the RSA, all amounts received by or accrued to the taxpayer, is dealt with in section 25D of the RSA Income Tax Act. The taxpayer may in principle elect to “the average exchange rate for the relevant year of assessment” and not the “the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred” – the expenditure is relevant to the medical (if applicable).
The amount of the foreign tax rebate, the calculation thereof may be complex, is determined by translating the foreign tax “to the currency of the Republic on the last day of that year of assessment by applying the average exchange rate for that year of assessment.” Section 6quat (4).
For purposes of sections 6A and 6B the following will qualify:
6A (contributions): “… fees paid by the person to … a fund which is registered under any similar provision contained in the laws of any other country where the medical scheme is registered.”
6B (qualifying expenses): “… any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment in respect of expenditure incurred outside the Republic on services rendered or medicines supplied to the person or any dependant of the person, and which are substantially similar to the services and medicines contemplated in paragraph (a) …”