Summary
tax388 ch21.1-21.3 source & non-residency summary
- Course
- Institution
- Book
this is a summary on the work covered in ch21.1-21.3 in the SILKE: South African Income Tax textbook as well as extra notes from the lectures
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
tax388 ch7 natural persons summary
-
tax388 ch4 specific inclusions summary
-
tax388 ch5 exempt income (for A1S1)
Seller
Follow
jana20
Reviews received
Content preview
ch21.1-21.3 source & non-residencyThursday, 07 March 2024 20:34
outcomes of this chapter
- identify the factors to consider to determine the tax implications of a cross-border transaction
- determine whether or not income is received or accrues from a south african source
- calculate the normal tax consequences of cross-border transactions for south africa for tax residents
21.1. overview [SILKE p.863]
global trade increased exponentially as technology & access to global markets improved which results in economic activities where
parties who are situated in different jurisdictions transact & interact with each other (e.g., foreign persons setting up business
operations in south africa or rendering services to south africans)
countries generally encourage cross-border trade given its positive impact on their economies. these transactions pose a challenge,
or threat, from an income tax pov as they may attract tax in more than one jurisdiction. respective tax authorities must acknowledge
the tax effects of transactions in the other jurisdiction to prevent multiple layers of tax, which is an obstacle to cross-border trade.
remember: cross-border transactions are also subject to the exchange control requirements in south africa
21.2. principles of south african taxation of cross-border transactions [SILKE p.864]
• countries generally have either a residence based tax or source based tax system
i. residence: taxes residents on their worldwide income (wwi) without having regard to the source of the income
ii. source: taxes income which has its source in the particular country & residential status of taxpayer is irrelevant
• south africa introduced a residence-based system of tax. this means that persons who are residents of south africa for tax
purposes are subject to income tax in south africa on their worldwide income (wwi)
• persons who are not residents of south africa for tax purposes are only subject to income tax in south africa on amounts
derived from a source in south africa. the tax i.r.o. amounts paid to non-residents is often levied in the form of a withholding
tax for ease of collection.
• starting point to determine south african tax implications of a cross-border transaction is to establish whether or not the
person who derives income is a resident of south africa for tax purposes
• a cross-border transaction may be subject to tax in:
○ jurisdiction where the income arises from the source country this tax is imposed on the basis that the income was
derived in this country, using its resources, irrespective of the residence of the recipient
○ jurisdiction where the recipient of the income is a resident this tax arises if the jurisdiction where the recipient is a
tax resident follows a residence based tax-system
• if the same amount is taxed in the hands of the same person by more than one country, the transaction may no longer be
economically feasible. various measures exist to prevent double tax from obstructing cross-border trade :. they incl.
○ countries that follow a residence-based tax system generally provide relief to their residents for certain foreign taxes
incurred i.r.o. cross-border transactions
○ certain cross-border transactions are exempt from tax this may be an exemption afforded by the source country or
the country of residence
○ governments enter into agreements to avoid double tax imposed on the residents of a country when they transact with
or in the other country
• the approach may be a useful guideline to determine the south african tax implications of a cross-border transaction
see the mind map at end of summary!
21.3. source (s9) [SILKE p.866] [see SAICA p.56]
note: section 9 has mostly to do with passive income
before 2001, south africa had a source-based tax system. at the time, the concept of source played an important role to determine
the income tax liability of both residents & non-residents
a. statutory source rules:
▪ act defines the source of some income streams. these statutory source rules mirror the source principles applied
in tax treaties to a large extent, although some exceptions exist
b. common law source principles:
▪ if the source of a specific type of income is not specified in the legislation or tax treaty, it must be determined with
reference with case law.
▪ if the source income must be determined with reference to case law, the inquiry generally involves 2 questions:
▫ what is the originating cause of the income?
▫ where is the originating cause located?
21.3.1. source of dividend income (s9(2)(a)) [SILKE p.867]
the source of dividend income depends on the residence status of the company that pays the dividend. if the dividend is paid by a
south african resident company, the source of the dividend is in south africa. if the dividend is paid by a company that is a non-
resident, the source of the dividend is outside south africa.
→ if a non-resident receives a dividend, ask yourself - was the company that declared the dividend a resident company or not?
refer back to 3.22. - a person is a resident if… [1] company incorporated or established in south africa or [2] the place
ch21.1-21.3 Page 1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller jana20. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.41. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75057 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now