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