Expat receiving pension from SA: Do I pay tax?

Cape Town - A Fin24 user living in Canada, but receiving a pension from South Africa wants to know if he is liable for paying taxes.

It is tax filing season, and Fin24, in collaboration with the SA Institute of Tax Professionals (SAIT), will as far as possible answer users' tax questions to help make the filing process as seamless as possible.

User question:

If I live in Canada, but receive a pension from South Africa. Am I liable for tax in SA?  Does this also apply to annuities?
What should do about medical expenses incurred in Canada?
How much money (funds) may my wife and I transfer to Canada without incurring any form of taxation?

Piet Nel, SA Institute of Tax Professionals responds:

This is a complex part of tax law and you may want to consult a tax practitioner.  We accept that the pension / annuity was not derived from government service, but we don’t know if you are no longer a resident of the RSA (for purposes of the treaty).  We also don’t know if the amount is received or accrues in respect of services which were rendered partly within and partly outside the RSA.  

Article 18 (Pensions and Annuities) of the treaty between the RSA and Canada reads as follows:

“1. Pensions and annuities arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. Pensions and annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise and according to the law of that State.”  

In essence the pension or annuity would therefore be taxed in both countries and relief will be given for any double tax that arises.  Section 10(1)(gC)(ii) of the Income Tax Act (RSA) exempts from normal tax any pension received by or accrued to a resident (of the RSA) from a source outside the RSA as consideration for past employment outside the RSA.  Binding general ruling 25 provides that the term “source outside the Republic”, for purposes of section 10(1)(gC)(ii), refers to the originating cause which gives rise to the pension income, namely, where the services have been rendered.

For purposes of the section 6B rebate (‘qualifying medical expenses’) any amounts (other than amounts recoverable by a person or his or her spouse) which were paid by the person during the year of assessment in respect of expenditure incurred outside the RSA on services rendered or medicines supplied to the person or any dependant of the person, and which are substantially similar to the services and medicines paid in the RSA.  

The tax Acts doesn’t deal with the amount of money that can be transferred from South Africa.  It is being dealt with in the Exchange Control Regulations (R1m discretionary allowance or R10m) and questions in this regard is best put to an authorised dealer.  The transfer of money itself will not have tax consequences in the RSA.

* Have a question? Send it to us and we will find an expert to answer.

The important deadline dates in the 2015 tax season are:

September 30 2015: Manual/postal submissions
November 27 2015: At a SARS branch (non-provisional)
November 27 2015: eFiling (non-provisional)
January 29 2016: Provisional taxpayers via eFiling

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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