South Africa: Submission of a tax return by a foreign company

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

South Africa: Submission of a tax return by a foreign company

dachs.jpg

Peter Dachs

The issue arises as to whether a foreign company is required to submit an income tax return. In this regard section 67(1) of the Income Tax Act provides that every person who at any time becomes liable for any normal tax or who becomes liable to submit any return contemplated in section 66 must apply to the Commissioner to be registered as a taxpayer.

The requirement to submit an income tax return is contained in section 66(1) read together with section 25(1) of the Income Tax Act. These sections provide that the Commissioner must give annual notice of the persons required to furnish a tax return.

The latest such Notice states that every company which is a resident, or every company which is not a resident which either carried on a trade through a permanent establishment in South Africa, or which derived any capital gain from a South African source is required to furnish an annual return for the 2013 year of assessment. This is in contrast to the 2012 Notice which provided that every company which is either a resident, or which derives any gross income or capital gain from a source within South Africa, is required to furnish an annual return for the 2012 year of assessment.

A permanent establishment is defined in section 1 as a permanent establishment as defined from time to time in Article 5 of the Model Tax Convention for Income and Capital of the OECD.

Section 9 of the Act contains provisions relating to the source of income. Section 9 does not specifically deal with capital gains. However, the capital gains tax provisions apply to the disposal of assets. Section 9(2)(k) provides that an amount is sourced in South Africa if it constitutes an amount received by or accrued from the disposal of an asset (other than immovable property or a right in immovable property) and if that person is not a resident and that asset is attributable to a permanent establishment of that person which is situated in South Africa.

Therefore, based on the Notice and provided that a foreign company does not have a permanent establishment in South Africa and does not accrue capital gains from the disposal of immovable property, such foreign company should, in terms of this provision, not be required to submit an income tax return for the 2013 year of assessment.

The other circumstance in which a foreign company must submit an income tax return is if it is "liable to taxation" in South Africa. While this term is not defined it should be interpreted to refer to a foreign company which receives South African sourced or deemed sourced income.

Peter Dachs (pdachs@ens.co.za)

ENSafrica – Taxand

Tel: +27 21 410 2500

Website: www.ens.co.za

more across site & shared bottom lb ros

More from across our site

ITR’s data has highlighted the US firm’s ambition to become America’s ‘premier’ tax player via a concerted partner recruitment strategy
Jaap Zwaan’s arrival continues a recent streak of A&M Tax investing in the region; in other news, the US and Japan struck a deal that significantly lowered tariff rates
In a world where international tax concepts rely on human activity, Leonard Wagenaar poses existential questions about the future of such ideas when AI is ever-present
France v Axa provides a practical illustration of how the burden of proof is applied in TP matters under French law, ITR also heard
In an exclusive interview with ITR, Ian Gary calls for a central public CbCR database and bemoans the US’s lack of involvement in international tax transparency
Reckitt Benckiser is to divest its Essential Home business, which includes more than 70 brands, to private equity firm Advent International
In the first of a new series of weekly opinion pieces, ITR Editor Tom Baker reflects on the OECD’s attempts to sanitise the US’s brazen pillar two negotiations
The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
In its latest G20 update, the OECD also revealed tense discussions with the US where the ‘significant threat’ of Section 899 was highlighted
Gift this article