It has come to our attention that there are still taxpayers who are unaware of the fact that they have to notify SARS within 60 days (from the date the foreign tax was withheld) if they intend to use the section 6quin rebate for foreign withholding taxes paid.
The Taxation Laws Amendment Act No. 24 of 2011 (TLAA) introduced subsection (3A) to section 6quin of the Income Tax Act in January 2012.
The TLAA stated that subsection (3A) would come into operation on a date to be determined by the Minister by notice in the Government Gazette, which date must be later than 1 January 2012, and applies in respect of amounts of tax withheld or imposed by any sphere of government of any country other than the Republic during years of assessment commencing on or after the date so determined.
On 2 July 2013 the Minister of Finance promulgated the effective date of subsection (3A) as 1 July 2013.
Section 6quin provides for a rebate in respect of foreign taxes withheld by a foreign government on income from a source within the Republic of South Africa. The new subsection to this provision effectively places a 60 day time limit/window period on section 6quin in which the rebate can be claimed in circumstances in which the tax is withheld by the government of a country with which South Africa has concluded a double taxation agreement. Where tax is withheld by the government of a country with which South Africa has not concluded a double taxation agreement, subsection (3A) which contains the 60 day reporting requirement will not apply.
Section (3A) reads as follows up until 16 January 2014: “where an amount of tax is levied and withheld as contemplated in subsection (1)(a), no rebate may be deducted in terms of this section if the resident contemplated in subsection (1) does not, within 60 days from the date on which that amount of tax is withheld, submit to the Commissioner a declaration in such form as may be required by the Commissioner that the amount of tax was levied and withheld as contemplated in subsection (1)(a).” (Emphasis added.)
Section 4 of the Tax Administration Laws Amendment Act, 2013 substituted the above underlined wording with the word “return”. This Amendment Act was promulgated on 16 January 2014.
In May 2013 SARS released a ‘FTW01′ form to implement this requirement of a declaration or return. The wording of subsection (3A) states that the FTW01 form is only required for taxes withheld during years of assessment commencing on or after 1 July 2013.
It is important to note that the FTW01 must be submitted to SARS in respect of each transaction where tax was withheld in the manner discussed above for which the resident contemplates claiming the section 6quin rebate within 60 days from the date when the tax was withheld (not only at the time of assessment).
Supporting documentation for the foreign tax withheld, for example assessments, receipts and tax certificates, will need to be submitted together with the taxpayer’s declaration as per the wording on the FTW01 form.
According to the “Comprehensive guide to the ITR14 returns for companies”, the declaration of foreign tax withheld (FTW01) together with relevant material in respect of foreign tax withheld must be submitted to SARS within 60 days from the date the tax was withheld or paid to 6quin@sars.gov.za. The apparent purpose of this submission/declaration is to give SARS an opportunity to attempt to recover the tax from the foreign government, if withheld contrary to a relevant double tax treaty. If SARS is successful, the rebate will presumably be reversed.