[FAQ] Income tax consequences for an individual taxpayer who received foreign income


A taxpayer who is a South African tax resident and an academic doctor (he researches cultures), received a grant from the Chinese Government of R50 000. The taxpayer states that all the funds were used to finance a trip to China. The taxpayer is not sure how to declare the income and expenses apart from stating that it is income considered to be non-taxable. He could not obtain any formal documentation from China, apart from emails.

What are the income tax consequences for the taxpayer in terms of the income received?


We may need more information before we can provide some guidance. 

Article 20, of the double tax agreement between the RSA and the People’s Republic of China deals with researchers. It reads as follows:


  1. Remuneration which an individual who is or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or educational institution or scientific research institution recognized by the Government of the first-mentioned State, derives for the purpose of such teaching, lectures or research shall not be taxed in the first-mentioned State, for a period of two years from the date of his first arrival in the first-mentioned State. 
  2. The provisions of paragraph 1 of this Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons. 

But we suspect that it doesn’t apply as it may well be that the research is undertaken in the RSA. We are not sure if the cost of the trip referred to was to travel to China, or travel for purposes of the research. 

If the research is carried on in the RSA, it appears that the individual is not conducting the research as an employee, but in an independent capacity. The income will then be declared in the business or trade part of the return, and the qualifying deductions will be made there as well. 

Webinar Commentary

Further webinar commentary on Offshore Tax Planning Options for a SA Tax Resident can be accessed here.

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