If you’re a South African living abroad and you draw a pension or annuity from South Africa you could save substantial tax if certain requirements are met. As a tax resident of your new country you will typically be taxed on your worldwide income, but you may already have been taxed in South Africa on this ’foreign sourced’ income – even though you are not a tax resident there anymore. Essentially this means that you could be liable to pay tax on the same income in South Africa and your new country of residence.
Luckily South Africa and certain countries have a Double Taxation Agreement (DTA) in place to assist South Africans living abroad. The purpose of this agreement is to eliminate double taxation, which means you may be eligible for tax relief.
Furthermore, the provisions contained in the DTA will typically ensure you of a tax saving due to the difference in the effective tax rates levied in each country.
In order to qualify for the tax relief in South Africa, you will need to submit a special application to SARS. The administrative process can be challenging, which is where cashkows.com is ready to assist.
What is the tax treatment of my monthly foreign annuity or pension payment?
Most periodic pensions/annuities are taxed in full in South Africa, however you will need to include the gross income in your tax return in your new country of residence. If there’s a DTA in place between your country of residence and South Africa, the DTA could state that your periodic pension/annuity is only taxable in your new country of residence. (It varies from one country to the next.)
In such cases no foreign tax credit will be issued, and in order to prevent double taxation – you will need to apply to SARS to have the tax levied in South Africa refunded. An RST02 application will have to be submitted to SARS to request this refund.
Applying for relief from South African tax on pension and annuity income
In addition, an RST01 application should be submitted to SARS. SARS will then issue a directive, which will instruct the relevant insurance company not to deduct any further income tax from your periodic pension/annuity income. This application has to be renewed annually.
This relief will also typically – depending on your circumstances – provide you with a tax saving due to the difference in marginal tax rates between the two countries.
Don’t lose another cent, let cashkows.com help you out!
Applying for tax relief can be a lengthy and confusing process. Following the wrong procedures could also make you guilty of non-compliance, which could see you face hefty fines and surrender large portions of your income to authorities in South Africa or abroad.
cashkows.com can take this administrative burden off your hands. Our services are compliant, efficient, fast and ensures the greatest value for South African emigrants abroad.
In addition to being fully compliant with revenue authorities in South Africa and abroad, we will ensure that you receive the optimal benefits due to you under foreign tax treaties and that the admin process is expedient.
So if you, or your elderly relatives or friends living abroad are struggling with their RST01 or RST02 applications, we can assist you with this process and ensure that you don’t surrender unnecessary funds to the tax man on either side of the pond. Let us call you.