New Requirements for Claiming Tax Rebate in Respect of Foreign Taxes

New Requirements for Claiming Tax Rebate in Respect of Foreign Taxes


SARS recently confirmed a 60-day window for claiming back foreign taxes paid for local services rendered to a foreign based customer in order to qualify for a deduction against South African taxes due in respect on the income received.

In some instances where a South African tax resident renders services in South Africa to a foreign based customer, the foreign country in which the customer is based may levy a withholding tax on any payments made to the South African service provider. Subject to certain limitations, section 6quin of the South African Income Tax Act grants the South African service provider a deduction of these foreign taxes paid against the taxes payable in South Africa on this income.

This follows the insertion of a requirement in the 2011 Income Tax Amendments that the tax deduction can only be claimed if a declaration is submitted to SARS within 60 days from the date on which the tax is withheld by the foreign government. This amendment was to be implemented on a date determined by the Minister of Finance.

Notice has now been provided[1] confirming the implementation date from which the declaration needs to be submitted to SARS is 1 July 2013. The declaration form known as an FTW01, Declaration of Foreign Withheld Tax has also been issued.

Any client that renders services to foreign customers from South Africa, for example technical or management services, which is subjected to a withholding tax by that foreign country, would need to submit to SARS a declaration within 60 days of the taxes being withheld in order to be able to claim a deduction against their South African taxes payable in respect of that income.

[1] Government Gazette No. 463