Interpretation of Article 22 of the DTA with the UK. The client's interpretation is that any unused rebated maybe set-off against UK income taxable in SA. Example: UK Rentals 10,000, UK Pension R6,000. UK allowance (rebate) 7,000. UK income less rebate (1
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
For ease of reference, we copied Article 22 below for ease of reference.
“Limitation of Relief
Where under any provision of this Convention any income or gains are relieved from tax in a Contracting State and, under the law in force in the other Contracting State a person, in respect of that income or those gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the income or gains as is taxed in the other Contracting State.”
The wording doesn’t quite lead to what the client’s view is. You must remember that the relief is provided for in section 6quat, of the RSA Act, or section 10(1).
I am not sure what the rebate is that you are referring to – I accept it is allowable deductions. The ‘income or gains’, in my view, refers to taxable income and not to the gross amount.
The problem with the pension, is that (unless it is a government pension), paragraph 1 of Article 17 states that “pensions and other similar remuneration paid in consideration of past employment, and any annuity paid, to an individual who is a resident of a Contracting State shall be taxable only in that State.”
Because it is only taxed in one country, no double tax would arise and no relief is necessary.