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


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 (

ENSafrica – Taxand

Tel: +27 21 410 2500


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