Taxation 3

TAXA7312/9
QUESTION BANK 2024
Exemptions and non-residents

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The Independent Institute of Education (Pty) Ltd is registered with the

Department of Higher Education and Training as a private higher education
institution under the Higher Education Act, 1997 (reg. no. 2007/HE07/002).
Company registration number: 1987/004754/07.
 Learning Unit 3: Exemptions and non-residents
Q.3.1 Calculate taxable income for a resident and non-resident
Q.3.2 Calculate taxable income and withholding tax payable by a non-resident
Q.3.3 Calculate taxable income for a non-resident
Q.3.4 Non-resident definition and discussion

3.1 Calculate taxable income for a resident and a non-resident

VC Learn: Activity 3.1.1

Mr A is 61 years old. All amounts referred to below were received in the current year of
assessment.

Mr A received dividends of R10 000 from a South African company listed on the JSE.

Mr A received foreign dividends of R11 000 from B PLC, a foreign company, in which he
owned 30% of the shares. B PLC is not a controlled foreign company as defined.

Mr A received foreign dividends of R18 000 from C PLC, a foreign company, in which he
owned 5% of the shares. C PLC is not a controlled foreign company as defined.

Mr A received foreign dividends of R8 000 from D PLC, a foreign company that has dual
listing on both the London and Johannesburg stock exchanges, in which he owned 1% of
the shares. 20% withholding tax was taken off the share dividend prior to the dividend being
received by Mr A.

Mr A received interest from Barclays Bank in the United States of $3,400 after withholding of
15% had been taken off. The average exchange rate for the current year of assessment has
been $1 = R8.30.

Mr A’s father had died 6 years ago and an annuity was set up in terms of his will. The will
was signed in South Africa. Interest of 3 000 a month was distributed to Mr A in terms of the
annuity.

Mr A received interest of R5 000 from a B Ltd, a company resident in South Africa that he
gave a loan to. The loan was granted overseas, but it was used in South Africa.

Mr A also received interest of R13 000 from a SA bank.

Mr A wrote a book in SA. He earned royalties of R15 000 from the book sales in SA. He
incurred costs of R4 000 to market this this book.

Mr A also earned royalties from a book he wrote that was sold overseas. Royalties of R40
000 were received. Foreign tax of R6 000 was paid on these royalties. In addition, costs of
R2 000 were incurred to receive the royalties overseas.
Mr A also earned royalties on the sales made in SA to the value of R14 000.

Mr A also rents out property:

  Fixed property 1 is located in Durban and he received rental of R25 000 during the
year. He spent R5 000 on repairs getting the property ready to be rented out. He also
incurred expenses of R8 000 after he ceased renting out the property.
 He also rents out printers from an office in Johannesburg. He knows that 95% of the
printers are used in SA and 5% of the printers are used in Lesotho. He earns R80
000 rent a year and incurs R20 000 expenses.
 Fixed property 2 is located in France and received rental of R70 000. Expenses of
R30 000 was incurred.

He earned a salary of R50 000 working in the UK for a listed company. He was outside the
Republic for 190 days in a year, of which he was outside SA for 90 days consecutively. He
paid tax of R3 500 on this salary

Mr A took purchased an annuity on 1 May by investing R120 000 in a South African fund. He
would receive R2 000 a month for 10 years.

Mr A received an annuity of R10 000 from a will signed in SA.

Mr A received an annuity of R15 000 from a contract signed overseas.

In the past Mr A had worked for 15 years for a foreign employer before taking early
retirement. He receives a pension of R15 000 per month. (He spent 10 years overseas
working for the employer and then the last 5 years in SA).

Required:
a. Calculate tax liability for Mr. A for the current year of assessment assuming he is a South
African resident. (50)
b. Assume Mr. A is not a South African resident and he did not spend more than 183 days
in South Africa during the current year of assessment, nor did not carry on a business
through a permanent establishment.
(32)
1. Calculate “taxable income” for Mr. A for the current year of assessment’
2. Calculate any withholding tax that Mr. would have to pay
3.2 Calculate taxable income and withholding tax payable by a
non-resident

VC Learn: Activity 3.2.1

Antonio Romana (33 years old) is an international soccer player and a South African non-
resident. He does not carry on business in the Republic. During the 2024 year of
assessment, he played in some exhibition soccer matches in South Africa for two months.
His gross fees for appearing in the matches amounted to R426 000. On 1 February 2024
Antonio also received royalty payments of R210 000 from a South African sporting goods
manufacturer, for the right to print Antonio’s trademark signature on a new range of soccer
balls. Antonio invested some of the money that he earned in South Africa into a local bank
account. The investment yielded local interest income amounting to R43 500 during the
2024 year of assessment.

Required:
Calculate Antonio’s taxable income and the withholding taxes he has to pay for the year
ended 28 February 2024.
(9)

3.3 Calculate taxable income for a non-resident

Thali Mlangu (42 years old) is resident in Canada. He qualified as an engineer in 2009 and
has since worked for a Canadian Power Company. He is not happy with his current job and
feels that he can earn a lot more if he gets employment in the RSA. He visited the RSA on
numerous occasions due to work commitments and really loved the country. He did some
consultations for Eskom on the Medupi Powerplant and the Medupi head engineer really
liked Thali and offered him a great salary package if he would consider coming to work on
the Medupi Powerplant.

Thali Mlangu is not sure whether to come to SA permanently or whether he should consider
working on a part time basis between Canada and SA. His current employer however
warned him that if he considers working part time in SA, he might be liable for tax in Canada
as well as in the RSA. Thali is not keen to pay double tax and does not have a good
knowledge of tax to make an informed decision.

The following table reflects days physically present in the RSA:

2020 97 days
2021 256 days
2022 201 days
2023 127 days
2024 236 days

Thali Mlangu earned the following income during the 2024 year of assessment:
 From SA in From Canada
SA Rands in Canadian $
Salary (taxed at 20%) 90 000

Consulting fee 67 000

Interest from bank 34 000 9 800

Sporting fee 2 000 A

Use of Image shot 1 500

A. Thali is a keen mountain bike rider and has won numerous prizes in Canadian Mountain
bike challenges. A local race coordinator also working on the Medupi Powerplant heard
about his talents and asked him to participate in a Mountain bike challenge in Lepalale.
He offered to sponsor him with a "state of the art" SA mountain bike to the value of R19
200 (if he agreed to participate) as well as a R2 000 racing fee. Thali's image was used
as advertisement for the big challenge, and a local company sponsoring the challenge
agreed to pay him a once off amount of R1 500 to use his image shot. All fees were paid
to him on race day 16 December 2023.
Exchange rate: R13.40 to Canadian $1.

Required:
1. Calculate with brief reasons Thali Mlangu's South African taxable income for the 2024
year of assessment and the withholding tax he will need to pay. (10)
2. Calculate the tax implications for Thali if he is to visit SA for 103 days in the 2024 year
of assessment (assume that his income streams will be exactly the same as the 2024
year of assessment). (10)
3. Explain and calculate the tax implications for Thali if he is to visit SA for 103 days in the
2025 year of assessment. The days for all previous years remain the same as part 1
(assume that his income streams will be exactly the same as the 2025 year of
assessment). (15)

3.4 Non-resident definition and discussion

Sandy Ross and his wife emigrated from South Africa to Costa Rica, a country which does
not have a double-tax agreement with South Africa, on 20 November 2022. He became a
resident of Costa Rica, purchased a house there in December 2022, and he and his wife
established their principal home in Costa Rica. He also joined a church there.

Prior to his emigration Sandy had never been outside South Africa for more than thirty days
in aggregate in a particular year of assessment.

When he emigrated, he did not sell his luxury home in Cape Town. In April 2023, he let it to
a business associate for a week. For the rest of the year ended 28 February 2024 his sons,
who were students are a university in Cape Town, occupied it. When Sandy visited Cape
Town, he also occupied it. It is not his intention to let the property on an ongoing basis.

Sandy Ross had been the managing director of Great Trades (Pty) Ltd until 20 November
2022. After emigrating, he retained his shares in Great Trades (Pty) Ltd. In addition he
advanced 1.5 million on loan account to the company. The loan bears a market-related
interest rate. He has remained a non-executive director of Great Trades (Pty) Ltd.

During the 2024 year of assessment, Sandy Ross visited South Africa on six occasions with
the result that he spent a total of 128 days in the country during the year of assessment.
Sandy Ross is a world-class fisherman and most of these trips had been to compete in
angling competitions. Other trips were to supervise his sons and attend directors’ meetings
of Great Trades (Pty) Ltd. While in South Africa he resided in his “former” home with his
sons.

His income from South Africa for the year ended 29 February 2024 consisted of the
following:
 Rental income from letting his house for one week in April 2023 – R15 000
 Director’s fees from Great Trades (Pty) Ltd – R60 000
 Pension – R120 000
 Interest on loan granted to Great Trades (Pty) Ltd – R52 300
 Dividends from shareholdings in various South African companies – R100 000

Required:
1. Based on the information provided, discuss whether Sandy Ross is a resident as defined
for the 2024 year of assessment.
2. On the assumption that he is not a resident as defined, calculate his taxable income
from South Africa will be taxed in the 2024 year of assessment. Sandy was 68 years old
on 29 February 2024.
SAICA adapted