VAT Regulations dealing with the supply of electronic services

Since 2015, foreign suppliers of electronic services (such as audio-visual content, e-books etc.) in South Africa are deemed to operate an enterprise for VAT locally. Although the regime has been in place for several years, new regulations in this regard are continuously published, the latest being on 18 March 2019, with an effective date of 1 April 2019. Along with the new regulations, SARS has published a “FAQ” document that addresses some of the questions that vendors and the public at large are likely to have about the implications of the updated regulations and recent legislative amendments. Below, we explore some of the more pertinent matters that SARS addresses in the “FAQ” document.

 

What are electronic services? Electronic services mean any services supplied by a non-resident for consideration using –

  • an electronic agent;
  • an electronic communication; or
  • the internet.

 

Electronic services are therefore services, the supply of which –

  • is dependent on information technology;
  • is automated, and
  • involves minimal human intervention.

 

Simply put, this means that from 1 April 2019, you will have to pay VAT on a much wider scope of electronic services. The regulations now include any services that qualify as “electronic services” (other than a few exceptions) whether supplied directly by the non-resident business or via an “intermediary”.

 

Some examples include:

  • Auction services;
  • Online advertising or provision of advertising space;
  • Online shopping portals;
  • Access to blogs, journals, magazines, newspapers, games, publications, social networking, webcasts, webinars, websites, web applications, web series; and
  • Software applications downloaded by users on mobile devices.

 

What is specifically excluded from the ambit of electronic services in the updated regulations?

 

Excluded from the updated regulations are –

  • telecommunications services;
  • educational services supplied from an export country (a country other than South Africa), which services are regulated by an education authority under the laws of the export country; and
  • certain supplies of services where the supplier and recipient belong to the same group of companies.
What is the reason for the updated regulations?

 

The original regulations limited the scope of services that qualified as electronic services, and which must be charged with VAT at the standard rate. The intention of the updated regulations is to substantially widen the scope of services that qualify as electronic services, so that all services supplied for a consideration (subject to a few exceptions), which are provided by means of an electronic agent, electronic communication or the internet, are electronic services and must be charged with VAT at the standard rate.

 

Do the updated Regulations make a distinction between Business-to-Business (B2B) and Business-to-Consumer (B2C) supplies?

 

No, there is no distinction between B2B and B2C supplies, therefore, B2B supplies will be charged with VAT at the standard rate. This outcome was intentional as the South African VAT system does not fully subscribe to the B2B and B2C concepts.

 

What are some examples of supplies that are not electronic services?

 

·  
         
  •   Certain educational services
  • Certain financial services for which a fee is charged
  • Telecommunications services
  • Certain supplies made in a group of companies
  • The online supply of tangible goods such as books or clothing
  • Certain supplies or services that are not electronic services by their nature, but where the output and conveyance of the services are merely communicated by electronic means, for example:
    • a legal opinion prepared in an export country, sent by e-mail; and
    • an architect’s plan drawn up in an export country and sent to the client by e-mail.

Given the much wider scope of application for electronic services, both local and foreign vendors need to ensure that VAT is levied at the appropriate rate on the supply of electronic services – and local vendors, where relevant, need to retain the necessary supporting documents to substantiate any input tax claims.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Application for reduced assessments

Where taxpayers are aggrieved by assessments issued by the South African Revenue Service (SARS), the Tax Administration Act[1] makes provision for a dispute resolution process, whereby a taxpayer can request reasons for an assessment, object to an assessment, and if necessary, further appeal procedures are available. Dispute resolution is process-orientated, and strict rules prescribe the form, dates and general procedures applicable to both taxpayers and SARS. Given the involved process, dispute resolution is often costly, with professional assistance being required to ensure compliance with the system. When there are obvious mistakes in an assessment (as opposed to matters of substance or interpretation), going through a dispute resolution process can be a frustrating process for taxpayers, since amounts assessed should never have arisen in the first place.

Fortunately, the Act makes provision (in section 93), for SARS to make reduced assessments if SARS is satisfied that “there is a readily apparent undisputed error in the assessment” by SARS or the taxpayer in a return. SARS may make such reduced assessments even though no objection has been lodged, or no appeal has been noted. There are however some difficulties in applying section 93, both practically and in substance.

On a practical level, neither the Act nor any dispute resolution rules make provision for the process to be followed in terms of section 93. In a recent tax court decision,[2] the judge concluded the following regarding the process:

However, the basis on which a taxpayer can have a matter considered under s 93(1)(d) is clearly not by way of objection to, or appeal against, an assessment. A separate procedure is available for these. Neither does it envisage a formal application. It seems to me that it is simply by way of a request.

The request procedure, unfortunately, leaves the taxpayer out in the cold, since it is doubtful that an outcome to the request would have been obtained within 30 business days after an assessment was issued – the period within which an objection was required to be lodged. An application in terms of section 93 will not suspend the period during which an objection is required to be lodged – should the request ultimately be denied; the taxpayer has severely damaged his chances on success if objection is the next recourse, since the objection may potentially be submitted late.

Equally challenging, is that there is no clear indication or definition for what would amount to a “readily apparent undisputed error”. What may be very apparent to the taxpayer, may not be interpreted as such by SARS. Arguably, a “readily apparent undisputed error” would be something along the lines of incorrect tax rates applied, or incorrect penalty percentages applied – requiring minimal (if any) interpretation of tax provisions.

Although providing an avenue for the reduced assessments for taxpayers, a request in terms of section 93 should be managed very cautiously, as it may be necessary to run a parallel objection process to ensure that taxpayers are not jeopardised in the other remedies available to them, in the event of an unsuccessful request.

[1] No 28 of 2011 (“the Act”).

[2] Rampersadh and Another v Commissioner for the South African Revenue Service and Others (5493/2017) [2018] ZAKZPHC 36 (27 August 2018).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Efficient and cost-effective audits

An efficient audit is one that reduces the audit risk to the targeted level, ensures that there are no errors contained in the financial statements while completed on time and within the budget. To ensure an efficient and cost-effective audit, we must understand the roles and responsibilities of both the client, or more specifically, the board of directors, and the company’s external auditor.

Responsibilities of the external auditor

  • Interest of shareholders

The primary role of an external auditor is to protect the interests of shareholders. Audits are conducted by an independent external auditor which makes it possible to take the interests of the shareholders into account. External auditors report the state of a company’s finances and attest to the validity of financial reports that may have been released. They conclude whether the information provided to shareholders and the board of directors are accurate and reliable.

  • Risk assessment

By conducting risk assessments, external auditors help the implementation of good corporate governance. Auditors review the security measures that a company has in place against corporate fraud or corruption. In addition to assessing potential risks, auditors also analyse the overall risk tolerance of the company as well as the efforts the company has made towards mitigating risks.

  • Internal controls

External auditors help clients implement effective internal controls to ensure efficient internal systems. During an audit, the external auditor will evaluate the current controls in place and recommend adjustments or new controls to be implemented. For example, a recommendation to implement a creditor’s reconciliation at the end of every month which the director will be required to mark and sign off once completed.

  • Regulators

An external auditor will help ensure a good relationship with regulators. Regulators tend to be collaborative with companies that appear to have transparent operations. External auditors evaluate the company for compliance with regulations. Regulators are also more likely to trust company disclosures after an auditor attests to them.

  • Accountability

External auditors may introduce measures and policies designed to compel accountability in the workplace. For instance, auditors could recommend consequences for managers who manipulate accounting records to show a profit and ensure that they receive a bonus at the end of the financial year. Penalties for such acts could include stripping the manager of his/her position or his/her compensation, such as reducing annual bonuses.

Responsibilities of the board of directors

  • Risk management

The directors and senior management are required to be fundamentally concerned with evaluating an organisation’s management of risk. For example, risks to the reputation of the company, unhappy customers, health and safety risks, accounting risks, accountability risks, legislation risks, risks associated with market failure and financial risks. To ensure the organisation’s success and take the interest of stakeholders into account, these risks must be managed effectively.

  • Evaluating and improving internal controls

Directors and senior management should continuously evaluate the effectiveness and efficiency of current internal controls and consider improvement. For example, a major new project is being undertaken – the assigned directors and senior management can help to ensure that project risks are clearly identified and assessed with action taken to manage them. From this assessment, controls can be implemented to ensure the project flows effectively and complies with the tone and risk management culture of the organisation.

  • Analysing operations and confirming information

Achieving objectives and managing valuable organisational resources will require systems, processes and people. Directors work closely with line managers to review operations and report their findings. The directors must be well-versed in the strategic objectives of their organisation and the sector in which it operates, so that they can have a clear understanding of how the operations of any given part of the organisation fit into the bigger picture.

  • Evaluating risks

It is senior management’s job to identify the risks facing the organisation and to understand how they will impact the delivery of objectives if they are not managed effectively. Directors and senior management need to understand how much risk the organisation is willing to live with and implement controls and other safeguards to ensure these limits are not exceeded. Some organisations will have a higher appetite for risk arising from changing trends and economic conditions. This risk-based approach enables the directors and senior management to anticipate possible future concerns and opportunities for providing assurance, advice and insight where it is most needed.

With the above roles and responsibilities fulfilled and working efficiently, the year-end audit will be smooth-running. Unnecessary frustration, time and money will be saved by both the client and their external auditor.

‘Efficiency is doing better what is already being done’

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Form requirements for objections

Dispute resolution with the South African Revenue Service (SARS) generally has a two-pronged approach. Firstly, taxpayers must present their case on the merits – this will include the factual basis and background that has led to the dispute. Secondly, and equally important (if not more so), is the procedural process. This deals with timeframes, form requirements, notices of delivery etc. The procedural aspects are dealt with in the Tax Administration Act[1] (in the Act itself and further in dispute resolution rules promulgated in terms of the Act). The procedural process to an objection is crucial since non-compliance can result in a negative outcome for the taxpayer, despite having very strong merits. The following are some of the more important procedural aspects:Timeframe: Assessments must be objected to within 30 days after the date of an assessment. Where reasons have been requested for an assessment, the objection must be delivered within 30 days after receipt of the reasons. Importantly, “days” are business days (days other than Saturdays, Sundays, public holidays and the period between 16 December and 15 January of the following year annually).

Forms: Depending on the tax type (income tax, VAT, PAYE, etc.), SARS prescribes certain forms that must accompany the objection. For taxpayers who can submit disputes via eFiling, there is a guided process that populates the correct form. For taxpayers who do not use eFiling, manual forms are available on the SARS website.

Address: If eFiling is not used, taxpayers must specify an address where SARS’s decision of the objection or other documents can be delivered. The taxpayer who makes use of eFiling must always ensure that their most recent and up to date particulars(physical address, email address, contact persons etc.) are captured on the system, to ensure proper delivery of documents.

Grounds: The grounds on which the taxpayer objects are crucial, since a taxpayer may not appeal on a ground that constitutes a new ground of objection (if the dispute goes past the objection phase). Objections should therefore not only deal with the principal matter at hand but also any understatement penalties, provisional tax penalties and interest.

After the objection has been submitted, SARS is allowed to request additional substantiating documents to make a decision on the objection, these documents must be delivered to SARS 30 days after the request. If no additional documents have been requested, SARS has 60 days within which to consider the objection. If they did request documents, they are afforded a period of 45 days after delivery of the requested documents.

The above merely sets out the basics in terms of the procedural requirements for objections to assessments. Despite the standardised forms and prompts that have been included on SARS eFiling to assist taxpayers with objections, they are strongly advised to seek advice from a tax practitioner when entering the dispute resolution process, since dispute resolution has become a specialist field, which requires a hands-on approach.

[1] No. 28 of 2011

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The public audit amendment act: Groundbreaking if properly implemented

This article discusses the Public Audit Amendment Act, Act 5 of 2018, which amends the Public Audit Act, Act 25 of 2004, and which significantly expands key powers of the Auditor-General. The article then explores what the potential significance of this new law could be for South Africa.On 21 November 2018, the 2017/2018 consolidated national and provincial audit outcomes report was released, which indicated a discouraging fourth consecutive year of regressive compliance with laws and regulations. Fittingly, the long-awaited Public Audit Amendment Act, Act 5 of 2018 (“the Amendment Act”), which substantially amends the Public Audit Act, Act 25 of 2004 (“the Public Audit Act”), had been signed into law by President Cyril Ramaphosa three days earlier, on 18 November 2018. This article explains how the amendments will substantially expand the powers of the Auditor-General and explores what the potential significance of this new law could be for South Africa.

The Amendment Act in comparison to the Public Audit Act

In a nutshell, the Public Audit Act provided the Auditor-General with the authority to establish auditing functions, but the office lacked the necessary power to then enforce the implementation of its recommendations. In comparison, once the amendments come into force, in terms of section 3(1A) of the Amendment Act, the Auditor-General will be able to refer “suspected material irregularities” which arise from an audit to a relevant public body for further investigation. Such public bodies would include the Hawks, the South African Police Service and the Public Protector.

Another significant amendment, as per sections 3(1B) and 4 of the Amendment Act, is that the Auditor-General’s office is under a duty to follow up on whether remedial action recommended in the audit report has been taken. If not, appropriate remedial action to address this failure is required. Where there has been a failure to recover lost funds arising from wasteful and fruitless expenditure, the relevant official or board must be directed to recover the loss from the responsible person. When the official or board fails to do so, in the absence of a satisfactory explanation, the Auditor-General must issue a certificate of debt requiring that official or board to personally pay the amount specified in the certificate to the State.

Why these amendments are a crucial milestone for South Africa

According to the director of the Public Service Accountability Monitor, Jay Kruuse, one of the primary reasons that the Auditor-General’s office had not previously been given the power to enforce its recommendations was due to a universal assumption that State-Owned Enterprises (SOEs) and governmental departments would react to audit reports and any negative findings. However, recommendations made by the Auditor-General to meet acceptable audit norms and standards were simply ignored and/or blatantly disregarded in the past, with non-compliance becoming the norm.

There is a direct impact on South Africa’s already-strained public finances. Over the past 13 years, audit outcomes have steadily declined. The 2017/2018 consolidated national and provincial audit outcomes report indicated that fruitless and wasteful expenditure, or spending in vain due to neglect, poor-decision-making or inefficiencies, increased to R2.5 billion. This was a 200% increase from the previous financial year. Unauthorised expenditure went up to R2.1 billion, of which R1.821 billion was due to overspending on predetermined budgets. This resulted in 82 governmental departments failing to settle their debts by the end of the 2017/2018 financial year. Irregular expenditure increased to an alarming R51 billion, which excludes the R28.4 billion wasted by SOEs. It should be noted that irregular expenditure does not necessarily amount to fraud or wastage, but it does mean that procedures, regulations and laws were not followed and, therefore, further investigation is required.

The Amendment Act is aimed at changing this state of affairs, as now the Auditor-General’s office has the power to ensure accountability in the management of public funds. The Auditor-General, Kimi Makwetu, has stated that the aim of the amendments was to provide his office with the necessary power “to directly impact” on audit outcomes. Of course, although the Amendment Act will now make provision for SOEs and provincial and national governments and their accounting officers to be held accountable for contraventions and non-compliance, a collective effort from parliament and law enforcement will be required to ensure that there is sufficient implementation of the new law.

Conclusion

Up until this point in South Africa’s democratic history, there has been a chronic abuse of public finances by corrupt or incompetent politicians and bureaucrats. The fight against corruption and for governmental compliance in respect of spending policies was largely futile, due to a lack of accountability and consequences for those who transgressed the legislative and regulatory framework and for those who were tasked with overseeing governmental expenditure. It is hoped that national governmental departments, as well as both provincial and local authorities, will now feel pressured to comply with governmental objectives and that these amendments will over time lead to more positive developmental outcomes for South Africa.

 

Reference List:

“After years of barking, the AG gets teeth” Mail & Guardian November 23 – 29 2018.

The Public Audit Act 25 of 2004.

The Public Audit Amendment Act 5 of 2018.

 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Helpful tax resources

South African taxes are inherently complex and often involve interpretation, consulting and in exceptional cases, a fair amount of educated guessing on exactly what the legislature intended when the various acts were drafted. However, in order to assist taxpayers through the maze of information, there are some very helpful aids available to taxpayers and tax practitioners. This article provides some of these sources.

The guides above are only some of the more pertinent guides that are available. Other categories of guides available include:

  • customs and excise;
  • dividends tax;
  • employment tax incentive;
  • income tax;
  • tax administration; and
  • transfer duty.

Self-educating is an important part of being an informed, aware and responsible taxpayer and these resources are available exactly for that reason. Taxpayers should always ensure that they use the most recent versions of guides, especially if there have been any legislative amendments.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

S129 notice to the consumer and “delivery”

A consumer who enters into a valid credit agreement with a credit provider, is obliged to pay in respect of the terms of the credit agreement. Failure to do so will result in the credit provider proceeding with legal steps against the consumer to collect on the payments due, in terms of the National Credit Act. This is known as debt enforcement.There are many reasons why a consumer may default in his payments to a credit provider. Notwithstanding these reasons, the credit provider must follow certain procedures to enforce the agreement.

The first step, is for the credit provider to deliver to the consumer a written notice in terms of Section 129(1)(a) of the National Credit Act 34 of 2005 (“NCA”), notifying the consumer of the default and proposals as to what the consumer may do to resolve any disputes that he/she may have with the agreement or to work out a plan for the payments due under the agreement to be brought up to date. The consumer has ten business days to respond to the credit provider once he/she has received the letter. It must be noted though, that the consumer is under no obligation to respond to the notice in terms of Section 129(1)(a) (“the S129 notice”).

The consumer must be in default with his/her payment for at least twenty business days in terms of S130(1)(a) of the NCA, before the credit provider can deliver the S129 notice to the consumer.

The consumer must further be aware that the credit provider is legally bound to deliver the notice in terms of the S129 notice to the address of the consumer that is cited on the credit agreement – the address that the consumer chose when he/she signed the agreement.

The S129 notice, in terms of the Act, must be delivered to the consumer via registered post. The word “delivered” has been interpreted by the courts to give clarity, viz, the notice is to be dispatched to the correct post office for the address chosen by the consumer, when the credit agreement was signed, or to an adult at the location designated by the consumer, when the credit agreement was signed. Should the credit provider follow one of the above methods for delivery of the S129 notice, but the consumer failed to receive it by not collecting the notice from the post office, it would not be the fault of the credit provider and it would be deemed that the credit provider followed the “letter of the law” and would thus be within its rights to proceed with the issuing and serving of the summons.

Thus, it is not a defence for the consumer to raise that the notice was not delivered to him/her, as was explained by the Constitutional Court in the case of Kubyana v Standard Bank of South Africa Ltd, after revisiting the majority decision held by the Constitutional Court in the case of Sebola and Another v Standard Bank of South Africa Ltd and Another.

It falls upon the shoulders of the consumer to inform the credit provider, in writing, by hand or electronic mail, of any changes to his/her designated address in respect of receiving notices which defer from the credit agreement, to enable the credit provider to change the consumer’s records. Should the consumer not inform the credit provider of the new details, the credit provider will be bound to use the address as per the credit agreement and the consequence of this, is that the consumer will not receive the S129 notice, and when the ten business days have expired for the consumer to timeously give  the credit provider his intentions of how he/she wishes to deal with the default payments, the credit provider will be within its rights to proceed with the issuing and serving of the summons, incurring legal costs for the account of the consumer.

This was held in the court case of Robertson v Firstrand Bank Ltd t/a Wesbank.

Reference List:

  • National Credit Act 34 of 2005 read together with Amendment 19 of 2014
  • Kubyana v Standard Bank of South Africa Ltd (2014) ZACC
  • Sebola v Standard Bank of South Africa Ltd 2012(5) SA 142 (CC)
  • Robertson v Firstrand Bank t/a Wesbank (2015) ZAECGHC 7

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Admin penalties for outstanding corporate income tax returns

In general, all registered companies must submit corporate income tax (“CIT”) returns within 12 months of the end of the company’s financial year-end. This is applicable to all companies that are resident in South Africa, that receive source income in South Africa, or that maintain a permanent establishment or a branch in South Africa.

On 29 November 2018, the South African Revenue Service (“SARS”) issued a media release confirming that SARS will soon start imposing administrative non-compliance penalties as provided for in Chapter 15 of the Tax Administration Act[1] for outstanding CIT returns. To date, these penalties were only imposed on individuals with outstanding income tax returns.

This announcement follows a media release earlier in November 2018 which stated that SARS is once again embarking on a nationwide awareness campaign to reinforce taxpayers’ obligations to submit outstanding tax returns, specifically targeting companies.

In this regard, the fixed amount penalties in terms of section 211 of the Tax Administration Act range from R250 (where the company is in an assessed loss position) to R16,000 (in instances where the company’s taxable income exceeds R50 million) for each outstanding return. Once the penalty has been imposed, the penalty will increase by the same amount for every month that the non-compliance continues.

In order to determine the amount of the penalty to be imposed, SARS will consider the year of assessment immediately prior to the year of assessment during which the penalty is assessed.

The penalties will furthermore be imposed by way of a penalty assessment. Any unpaid penalties will be recovered by means of the debt recovery steps.

According to the media release, the administrative non-compliance penalties will be imposed for outstanding CIT returns for years of assessment ending during the 2009 and subsequent calendar years. Please note that this will also apply to dormant companies with no receipts or assets.

SARS will, however, issue the relevant company with a final demand which will grant the company 21 business days from the date of the final demand to submit the outstanding returns before the penalties will be imposed.

Companies may request remittance of the penalties imposed from SARS and have the right to lodge an objection via eFiling should the request for remittance be unsuccessful.

The takeaway is that all companies with outstanding CIT returns (whether these companies have assessed losses for those outstanding years or not) should complete and submit these returns as soon as possible in order to avoid the administrative non-compliance penalties being imposed.

[1] No. 28 of 2011

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Non-resident sellers of immovable property

Section 35A of the Income Tax Act[1] came into effect on 1 September 2007 and sets out the capital gains tax consequences of the sale of immovable property situated in South Africa in instances where the seller is not a South African tax resident.

In terms of these provisions, the purchaser of the immovable property is obliged to withhold the specified amount of tax from the purchase price payable, provided that the property is disposed of for an amount in excess of R2 million.

The amount to be withheld in these circumstances is 7.5% of the purchase price where the seller is a natural person, 10% of the purchase price where the seller is a company and 15% of the purchase price where the seller is a trust.

The amount of tax withheld in these circumstances must be paid to the South African Revenue Service (“SARS”) within 14 days after the date on which the amount was so withheld in instances where the purchaser is a South African tax resident. The period is extended to 28 days should the purchaser not be a South African tax resident.

The non-resident seller of the immovable property may, however, request a tax directive from SARS confirming that tax be withheld at a lower or even zero rate, depending on the specific circumstances applicable to that non-resident seller. In this regard, SARS will take into account factors such as any security furnished for the payment of any tax due on the disposal of the immovable property, whether the seller is subject to tax in respect of such disposal and whether the actual tax liability of the non-resident seller is less than the amount to be withheld in terms of section 35A.

In order to request such a tax directive, the non-resident seller must complete the relevant form NR03 and submit this to SARS, together with the offer to purchase, the relevant capital gains tax calculation and all other relevant supporting documentation. According to SARS’ website, the processing of this declaration or directive application is 21 working days.

The amount withheld from any payment to the non-resident seller is an advance payment in respect of that seller’s liability for normal tax for the year of assessment during which the property is disposed of by the non-resident seller.

Please note that if the non-resident seller does not submit an income tax return in respect of that year of assessment within 12 months after the end of that year of assessment, the payment of the amount under section 35A is a sufficient basis for an assessment in terms of section 95 of the Tax Administration Act.[2]

[1] No. 58 of 1962

[2] No. 28 of 2011

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)