Tax on income while resident in UK

[Darko]

Hi all,

Hopefully someone could assist me.

I lived and worked in the UK on a permanenet basis from September 2004 until April 2008. I returned to SA in May 2008 and started full time employment in June 2008.

Am I liable for any SA tax for the 2008/2009 tax season for income that I earned in the UK from March 08 to April 08?

Do I need to provide any further info?

Thanks

Darko

[Graeme]

If you have proof that you paid tax in the UK, you should be protected by the treaty against double taxation. No treaty with the USA that I am aware of. Just furnish SARS with the proof of what you earned and what tax you paid there.

[Morticia]

If you are still classified as SA resident (for tax purposes), the income earned abroad is exempt i.t.o. Sect. 10(1)(o)(ii) of IT Act (outside SA for longer than 183 days, 61 being continious, in any 12 month period).

There is a treaty with UK (and USA), but there should be no need to refer to it as local domestic legislation already provides for an exemption.

[Darko]

Thank you Graeme / Morticia,

The problem I have (as far as my understanding is concerned):

For the 2008/2009 tax year is that I would've been resident in SA for more than 183 days - i.e. I arrived back in SA during May 2008. I interpret that as meaning that I am resident in SA, and I will be taxed on income earned during March 08 and April 08 as I fail on the days rule.

This is worrying for me, since I earned quite a large bonus in the UK which was paid at the end of March 08. I can prove that I paid tax in the UK, but I also got refunded some of this tax when I left to return to SA.

And where on the IT12 do I declare this? I completed my 2008 IT12 (nil return) and I saw no section to declare income that I deemed to be non-taxable?

[Morticia]

Apologies - world's worst teacher, I did not make myself clear. The reference is to "any 12 month period", i.e. going forward (start of assignmenrt) or looking back (end of assignment). So you may count back from 30/4/09 - 1/5/08 - were you outside SA for 183 days, 61 continuous? YES, i.e. you qualify. The 12-month period does not specify fiscal year OR calendar year, simply "any 12 months".

The 2008 return first page specifically asked whether you earned foreign income exempt i.t.o. sect 10, and only if you clicked "yes" it would have opened the relevant section. Not too serious that you missed it as the income was exempt anyway, and presumably SARS accepted your return? Hopefully 2009 returns will be more user-friendly......

[Morticia]

Just a quick point - all the above ONLY applies if you worked for an employer in UK, i.e. in terms of an employment contract.

[Darko]

Morticia, thanks a million for clearing this up for me.

And yes, it was for a UK employer.

[Morticia]

Pleasure!

[Graeme]

Morticia, if you leave money in a savings account in New Zealand the NZ Govt deducts their tax at source; i.e. the interest you receive is net of NZ tax. Do I need to declare the amount (gross or net) on my return to SARS?

[Morticia]

Graeme, if you are SA resident, then yes, the income has to be declared in your SA tax return (SA residents taxed on worldwide income and gains). You then have to claim a foreign tax credit for the NZ taxes already paid. The foreign tax credit is limited to the tax payable on that source of income (e.g. where the NZ deduction rate is higher that the SA rate). (Article 21 of treaty between SA and NZ)

[Morticia]

Just to clarify - you declare gross interest and claim FTC on your SA return. Also state gross foreign tax paid, SARS will (or rather, they are supposed to) do the limitation calc if needed.