What is it?
Most countries impose tax on the worldwide income earned by a resident of that country and on income earned by non-residents on locally earned income. Therefore someone can be double taxed because they can be taxed in the country of residence as well as in the country of source where the income was earned. Certain countries have agreements to avoid double taxation. Normally these agreements provide that income of a certain nature will be taxed only in one of the two countries or may be taxed in both countries and the country of residence will allow a credit for the tax which has been imposed by source country. South Africa has agreements with a number of countries to prevent double taxation of income.
Who is it for?
A non-resident, who is not a tax resident of South Africa and receives income from a source in South Africa needs to apply for a directive for the relief from South African tax on pension and annuity income (excluding lump sums) or who wants a refund of tax that was withheld in terms of the Income Tax Act No. 58 of 1962 (the Act). The request should be in terms of the Double Taxation Agreement (DTA) that is in place between SA and the non-resident’s country of residence.
How to apply for a directive?
You can apply for a directive if you qualify as a non-resident. Follow these steps to apply:
- You can apply for a directive for the relief of the withholding of Employees’ Tax from your pension and/or annuity by completing the RST01 – Application by Non-Resident for a Directive for Relief from South African Tax for Pension and Annuities in terms of a DTA.
- The fully completed and signed RST01 must be posted to the address on the directive application form or it can be emailed.
- The tax office in the country of residence must certify on the RST01 that the person is a resident of that country in terms of the DTA between SA and the country of residence.
- The schedules to the RST01 must be completed in full.
- Where a DTA allows the source country (in this case South Africa) to exempt the income from tax to the extent the pension and annuity are included as income or taxable income, in the country of residence, proof that the income is or was included must be attached to the RST01. The proof can’t be older than a year. Example of proof may be an assessment (in the country of residence) where income is highlighted.
When will a directive application be rejected?
A directive application will be rejected when:
- The RST01 is incomplete.
- The tax office in the country of residence didn’t sign and stamp the RST01.
- The date stamp of the tax office is older than one year.
- The non-resident (who is registered in SA for Income Tax purposes) tax affairs aren’t in order.
- Proof that the pension and annuity income (reflecting as included in income in the assessment of the country of residence), isn’t included.
- Additional information asked for that wasn’t submitted.
- If, in terms of SA’s domestic law and the DTA; SA had the right to withhold tax.
Top Tip: Where Employees’ Tax was incorrectly withheld from a non-resident’s pension and/or annuity, in terms of the DTA between SA and the country of residence, a refund may be requested.
How to request a refund?
Firstly, the non-resident must be registered in SA for Income Tax purposes. For more information on how to register as a taxpayer, click here. Follow these steps to apply for a refund:
- An Income Tax Return (ITR12) must be completed and submitted for that relevant year of assessment. This is the first step which allows SARS to refund the Employees’ Tax that was withheld from the pension and/or annuity.
- A copy of the IRP5 – Employee Tax Certificate, issued by the fund responsible for withholding the Employees’ Tax, must be in your possession.
- The completed ITR12 may be submitted:
- Using eFiling, if you are registered. If you aren’t registered, just following these simple steps.
- Or appoint a representative taxpayer in SA to submit the ITR12 on your behalf. A TPPOA – Special Power of Attorney must be completed to enable the representative to deal with SARS on your behalf.
Top Tip: The Comprehensive Guide to the ITR12 for Individuals is available to assist in completing and submitting your return. Please note that the submission of the ITR12 doesn’t make provision for creating a refund immediately. Therefore, the ITR12 may be selected for audit and if it wasn’t, on receipt of the Notice of Assessment (ITA34) an objection must be lodged within 30 days of the date of the assessment.
- To enable SARS to revise your assessment and to create a credit (refund) on your account, submit the following relevant documents when lodging your objection or if you have been selected for audit:
- The fully completed RST02 – Request by Non-Resident for a Refund from South African Tax for Pension and/or Annuities in terms of a Double Taxation Agreement and all the relevant documents listed e.g. a bank statement, proof of residence, ID document, etc.
- A copy of the IRP5 – Employee Tax Certificate
- Any other document used to complete the ITR12.
- Proof that the income was included in the taxable income where a DTA allows the source country (in this case SA) to exempt the income from tax to the extent that the pension and annuity are included as income or taxable income in the country of tax residence. The proof can’t be older than a year.
When will a refund be rejected?
An application for a refund may be rejected where:
- In terms of SA’s domestic law and the DTA, SA has the right to withhold tax.
- The RST02 is incomplete.
- The documents needed to complete the request, is not provided. The documents as listed on the RST02 are
- Stamped copy of bank statement (1st page only) – must reflect the account details
- Proof of residential address
- Copy of client’s ID/Passport
- The tax office in the country of residence didn’t sign and stamp the RST02.
- The date stamp of the tax office is older than one year.
- The non-resident’s tax affairs aren’t in order.
- Proof that the pension and annuity income (reflecting as included in income in the assessment of the country of residence), isn’t included.
- Any other additional information asked for wasn’t submitted.
Related Documents
LAPD-Gen-G01 – Taxation in South Africa
LAPD-Gen-G02 – Guide for Tax Rates Duties Levies
LAPD-Gen-G08 – Guide on the Taxation of Professional Sports Clubs and Players
LAPD-IT-G02 – Guide on the Residence Basis of Taxation for Individuals
LAPD-IT-G24 – Guide on Mutual Agreement Procedures
RST02 – Request for Refund by Non resident for SA Tax Paid on Pension and Annuities – External Form
Frequently Asked Questions
FAQ: Must I be registered for Income Tax to request a refund for relief from SA Tax?
Yes, tax withheld can only be refunded if a person...
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