New tax form required for claiming relief for foreign taxes imposed or withheld on SA residents, says Deloitte

Issued by: Magna Carta (PR)
Taxpayers claiming relief for foreign taxes improperly imposed or withheld should take note that they are now required to complete a new declaration form that must be completed before relief can be claimed, says Deloitte.

The form (FTW 01) is applicable to South African residents seeking relief for improperly imposed or withheld foreign taxes in terms of Section 6quin of the Income Tax Act, which was introduced with the Tax Laws Amendment Bill of 2011, says Louise Vosloo, Director in International Tax at Deloitte.

The change is applicable to years of assessment commencing on or after 1 January 2012 and applies specifically in respect of services rendered to a non-resident within South Africa that have been subject to foreign tax. In order to claim the relief, the income in respect of these services must have been taken into account in computing the SA taxable income, says Vosloo.

Section 6quin provides for a rebate of the foreign taxes imposed or withheld against the normal SA tax payable. The rebate is the lesser of the normal SA tax payable attributable to the income, which has been subject to foreign tax, or the amount of foreign tax imposed or withheld.

Taxpayers are required to complete the form and submit it to SARS within 60 days from the date on which the foreign tax was levied and withheld.

In addition to completing this form, taxpayers will need to provide documentary proof in respect of foreign taxes paid such as assessments, receipts and tax certificates. Separate forms will need to be completed and submitted in respect of each agreement concluded.

The effective date for this has not been promulgated in the Government Gazette as yet; however, the recently enacted Tax Administration Act gives SARS the powers to request any information from taxpayers, in such manner or form as may be required by the Commissioner for the administration of any tax Act. As such, Deloitte advises that it is probably prudent to complete the FTW 01 forms where any foreign tax has been withheld or levied on or after 4 May 2013 where section 6quin applies. The Income Tax Act is silent on the documentary requirements where the amount of tax was imposed, ie, where the amount of tax is due and payable, but has not actually been paid. In this case, we advise that taxpayers keep copies of the agreements on file in case of SARS audits or queries, says Vosloo.

Click here to download the Foreign Tax Withheld Declaration Form: FTW01 – Declaration of Foreign Tax Withheld – External Form