What Does Double Taxation Mean If I Am Living Aboard?
If you are a resident of two countries for tax purposes, you may be subject to taxation in both countries on the same income, or if you are a resident of a country with a worldwide tax system, you may be subject to tax on your income in more than one country.
How Does The Double Taxation Agreement Benefit Me?
South Africa holds several of such agreements with various countries and the main purpose of a Double Taxation Agreement (“DTA”) is to allocate taxing rights between each country subject to the agreement, in respect of a taxpayer’s income.
Do I Qualify for Relief From Double Taxation?
This type of situation frequently raises questions about where a person can or should be taxed. During a free consultation, our double taxation specialists can determine whether a taxpayer qualifies for relief from double taxation. Taxpayers should be aware that a Double Taxation Agreement (“DTA”) becomes applicable to their circumstances if they earn income both inside and outside of South Africa, or if they are a tax resident of South Africa but have no income from a South African source and earn income from a foreign source.
Can I Use A Double Taxation Treaty To Protect My Foreign Earnings?
Yes, a Double Taxation Agreement (“DTA”) is the best way to safeguard your foreign earnings. It is important to note, however, that simply because the two countries have a double taxation treaty in place does not mean you are “automatically tax-exempt.” There are several factors that need to be considered, and objectively proven, and you are still required by law to file a tax return and “claim” exemption under treaty relief.
What Is The Purpose Of A Double Taxation Treaty?
If you have international economic interests, your income may be taxed both in South Africa and in the foreign country, resulting in double taxation. One of the primary goals of a Double Taxation Agreement (“DTA”) is to protect your foreign income and allow you to claim double tax relief. As a result, a DTA ensures that a taxpayer is not unfairly taxed in both South Africa and the other country, thereby protecting the taxpayer from double taxation.
How Can I Take Advantage Of The Treaty Relief On My Foreign Earned Income?
To apply treaty relief to your foreign earned income correctly, you must first determine which country you are considered tax resident. If you are considered tax resident in South Africa and another country, you can break your dual tax residency by applying a methodical process known as the tie-breaker test, which considers a number of factors such as, where you have a permanent home, where your center of vital interests are, i.e. where your family and economic ties are, and where your habitual abode is, to name a few.
Get in touch with us today to complete your FREE DTA assessment.
Who Should Seek DTA Relief?
South Africans living and working abroad may need to consider the tax treatment of their income in light of the Double Taxation Agreement (“DTA”) between South Africa and the country in which they are now residing. There is a possibility that you will be required to pay tax in South Africa on your foreign income.
I’m Not Sure If I Want To Emigrate Financially. What Am I Supposed To Do?
For starters, you can make a more informed decision by using our expat roadmap, which is based on this uncertainty. We are here to answer your questions, clear up any doubts, and assist you in creating a roadmap to safely guide you on the exciting journey ahead.
Let our experts guide you on the correct route to follow.
I Work In Saudi Arabia But Live In Bahrain; Is There A DTA Between The Two Countries?
South Africa and Saudi Arabia have a Double Taxation Agreement (“DTA”) in place. However, the location of your employer has no bearing on where your tax residency is determined. Our team of Attorneys and DTA Specialists can help you determine where you would be considered a tax resident and whether the DTA is available, and if so, whether it can be applied to your situation.
Does The DTA Include A Deemed Disposal event /Exit Tax? If So, Does It Happen Once A Year?
Yes, because using the Double Taxation Agreement (“DTA”) causes you to temporarily cease tax residency, it will result in a deemed disposal, which may trigger Capital Gains Tax implications, also known as an exit charge. The deemed disposal will take effect only in the first year you cease your tax residency through the DTA.
Do You Need To Be A Taxpayer In Saudi Arabia (Zero Tax Jurisdiction) For The DTA To Work?
It is a common misconception that if you live in a zero-tax jurisdiction, the Double Taxation Agreement (“DTA”) will not apply to you. The ability to claim DTA is determined by whether or not you pay taxes in the country in question, rather than whether or not you are a tax resident of the country in question.
Can I Still Claim The DTA If I Work In A Country Where I Do Not Pay Tax?
Yes, you can still do so. The ability to claim Double Taxation Agreement (“DTA”) is determined not by whether or not you pay taxes, but rather by whether or not you are considered a tax resident of the country in question.
Is A South Africa Tax Return Sufficient Proof For A DTA?
No, in order to claim DTA, certain requirements and tests must be met. Our team of Attorneys and DTA Specialists can help you determine whether you qualify for DTA relief and what steps you need to take to take advantage of it.
Is It Required To Apply For A Double Taxation Agreement ("DTA") Every Year?
Yes, claiming DTA will be required each year.
I‘m Planning On Returning To South Africa Eventually; Do I Need To Get A Tax Residency Certificate For The Country I’m Living In For The Current Year, Or Do I Need One For The Previous Five Years As Well?
In general, if you want to claim DTA relief, you should obtain tax residency certificates for all previous years that you have been living and working abroad.
What Happens To My Foreign Savings If I Return To South Africa Due To Current Or Future Economic Conditions?
Returning to South Africa does not affect your ability to have foreign savings. If you return to South Africa and recommence tax residency, any interest income earned from these savings would need to be declared to SARS.
Exactly What Is Tax Residence?
Tax residence is where you are considered a resident for tax purposes, i.e. where you should be paying taxes. In South Africa, there are two tests used to determine tax residency, namely the ordinarily resident test and the physical presence test. The ordinarily resident test looks at the taxpayer’s subjective intention supported by objective factors, and the physical presence test considers the number of days spent physically present in South Africa within a specified period.
What Is The Benefit Of A Double Tax Treaty?
Double tax treaties prevent double taxation; double taxation relief is sometimes extended to taxes paid by foreign subsidiaries and other foreign affiliates in terms of the definition of economic double taxation.
Is It Possible To Pay Taxes In Two Countries?
You’ll need to look into the other country’s residency rules as well as when the tax year begins and ends. If you are have dual tax residency, please contact us for assistance in claiming double taxation relief.
How Do Tax Treaties Help To Avoid Double Taxation?
A tax treaty eliminates double taxation in two ways: first, by allocating the right to tax between the contracting states; and second, where the state of source is assigned the right to tax, by requiring the state of residence to grant tax relief, either through exemption or tax credit.
What Can Be Done To Avoid Double Taxation?
A Double Taxation Agreement (“DTA”) is a tax treaty signed by South Africa with another country. A taxpayer can avoid being taxed twice by using the provisions of this treaty. A DTA can be either a comprehensive agreement that covers all types of income or a series of treaties that only target certain types of income.
How Does A Double Taxation Treaty Work?
A double tax treaty allows the tax paid in one country to be offset against the tax paid in the other, thereby avoiding double taxation. South Africa has signed double tax treaties with a number of countries worldwide. Certain types of income are tax-free or have reduced tax rates.
What Are The Factors That Contribute To Double Taxation?
It is considered double taxation when a taxpayer is taxed twice for the same purpose by the same taxing authority within the same jurisdiction during the same taxing period, and the taxes are of the same kind or character.
How Does Double Taxation Work In South Africa?
A Double Taxation Agreement (“DTA”) ensures that a taxpayer is not unfairly taxed in both South Africa and the country covered by the DTA.
With Which Countries Does South Africa Have Double Taxation Agreements?
South Africa has signed Double Taxation Agreements (“DTA”) for the avoidance of double taxation with a number of countries. Talk to our experts to find out if there is any relief between South Africa and the country in which you live.
What legislation will be used if there is no tax treaty between South Africa and the host country?
Each country’s domestic tax legislation will be applied independently of the other. Subject to certain conditions, the employee will be able to claim a section 6quat credit on assessment in respect of any double taxation that occurred.
Should a PAYE Withholding Employer Consider The Provisions Of A Tax Treaty When Employing Employees To Perform Services Outside Of South Africa?
Yes, the treaty must be considered in order to determine which country has the authority to tax the employee’s income. This will determine whether an employee in South Africa has a standard tax liability, in which case the employer must withhold PAYE.
Will The First R1.25 Million In Remuneration Be Protected By The Tax Treaty?
No, because the R1,25 million threshold relates to the exemption from ordinary taxation in South Africa in terms of section 10(1)(o)(ii) of the Income Tax Act, thus, the tax treaty will not apply.
Will The Tax Treaty Apply To Remuneration In Excess Of R1.25 Million?
Yes, the tax treaty will apply because any remuneration exceeding R1.25 million may be subject to double taxation.
Is The Exemption Under Section 10(1)(o)(ii) Subject To The Terms Of A Tax Treaty?
No, the R1.25 million is not taxed in South Africa and is not covered by a tax treaty. As a result, the exemption is not conditional on the application of a tax treaty and applies regardless of whether a tax treaty is in place.
Do I Have To File An Income Tax Return In South Africa If I Qualify For The Exemption?
Yes, the Public Notice issued under section 25 of the Tax Administration Act. 2011, read in conjunction with section 66 of the Act, specifically states that an individual working outside of South Africa is required to file an income tax return.