A taxpayer ceased to be a resident in South Africa during the year of assessment, and it came to his attention that SARS allows the rebates on a pro-rata basis in such cases. The taxpayer declared income only for that specific period and he accepts that rebates will only be allowed accordingly.
However, what if a taxpayer ceased to be a resident but still has a property in South Africa from which rental income is received for the full year of assessment? Will the rebates only be allowed pro-rata for the period up until the taxpayer ceased to be a resident? How will SARS address this issue?
The Income Tax Act
In terms of section 9H(2) of the Income Tax Act, where a person … that is a resident ceases during any year of assessment of that person to be a resident-
(b) that year of assessment must be deemed to have ended on the date immediately before the day on which that person so ceases to be a resident; and
(c) the next succeeding year of assessment of that person must be deemed to have commenced on the day on which that person so ceases to be a resident.
Under section 66(13)(a)(ii), a return for normal tax to be made by any person in respect of any year of assessment shall be … in the case of a person where a person ceased to be a resident … shall be made for the period commencing on the first day of that period and ending on the day preceding the date that the person ceases to be a resident.
Application of the principles
In terms of section 6(4) of the Income Tax Act, where the period assessed is less than 12 months, the amount to be allowed by way of a rebate under section 6(2) shall be such amount as bears to the full amount of such rebate, the same ratio as the period assessed bears to 12 months.
Your statement that the income is ‘declared for the full year of assessment’ needs comment as well. It is only South Africa sourced income that must be declared by the non-resident for the rest of the year.
Further webinar commentary on Application of tax rates, s6(2) rebates can be accessed here.