Double Tax agreement

A Double Taxation Agreement (DTA) is an agreement between two countries which aims to eliminate double taxation of income arising in one country and paid to a resident of another country.  The agreements are also sometimes referred to as tax treaties but the purpose remains the same – to avoid double taxation.

How it works

An individual might qualify for relief under a DTA in place between South Africa and the individual’s country of residence.

A DTA overrides the provisions of local South African fiscal legislation. Therefore, even though tax is payable in South Africa, South Africa might not be entitled to levy such tax. The DTA will therefore prescribe whether tax is waived in South Africa or if tax can only be levied in part.

Withholding tax on interest

Withholding tax on interest is a tax charged on interest paid to a foreign person from a source within South Africa, which is currently set at a final withholding tax rate of 15%. An individual may qualify for a reduced rate in terms of the DTA in place between South Africa and the applicable country of residence.

The reduced rate does not automatically apply as an individual is required to submit a Withholding Tax on Interest Declaration to the payer of the interest. It is therefore possible that the payer deducted withholding tax at a higher rate, and the individual will be required to request a refund for the overpaid tax. An application must be submitted to SARS within three years after payment of the interest. The withholding tax will subsequently be refunded to the non-resident.

Annuities/pension

If the DTA dictates a certain tax treatment in respect of pension/annuity income an individual may apply for either a tax refund or tax relief in terms of the South African tax paid.

Lump sum payment

A DTA may also specify the tax treatment of certain lump sums received and will allocate taxing rights to either both countries or solely to the country of residence.

Our main focus remains the taxes relevant to individuals and seeking relief were possible. Even though the income will remain taxable in your country of residence, the stipulations of the DTA might put you in a better tax position due to differences in the marginal tax rates between countries.

The cashkows.com solution

These are just some of the causes which might trigger a tax refund. However, every individual’s situation will be different and therefore needs to be reviewed independently.

If you would like a free assessment simply leave your details and a very brief explanation of the tax matter you want us to investigate and we’ll contact you!

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I recently had a great experience with CashKows and the transfer of my SA retirement annuities to Ireland. CashKows also offered to submit a closing tax return to SARS.

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