Ricochet News

Tax implications of offshore investment income

By Daniel Baines – Tax Consultant at Mazars and author of ‘How to Get a SARS Refund' - Jan 24, 2019
Tax implications of offshore investment income

If you are a South African resident and have offshore investments you should understand how the income earned from these investments is taxed.

As a South African tax resident (which most people who live in South Africa permanently are), you are obliged to pay tax on your worldwide income.

The tax treatment of offshore investment income is dependent on the type of income received.

  1. Foreign dividends –
  • If you earn dividends from a foreign company e.g. if you own shares of Apple in the United States – you are obliged to declare this dividend to SARS upon filing of your annual tax return.
  • However, a portion of the foreign dividend is exempt from taxation in South Africa. When you insert the details of your foreign dividend on your tax return the exempt portion will be automatically calculated.
  • In addition, any tax paid in the foreign country should be included on your tax return so that it may reduce any tax that may be payable in South Africa.
  1. Interest –
  • Offshore investment income in the form of interest is taxable in South Africa.
  • The interest earned will need to be declared on your tax return.
  • If you have paid tax on the interest in the country where the investment is located, this should also be declared on your tax return – this foreign tax will reduce any tax that is owing in South Africa.
  1. Capital gains –
  • If you own shares offshore and sell these shares they are subject to taxation in South Africa.
  • Again, if you have paid tax on the capital gain in the country where the investment is located, this should also be declared on your tax return - this foreign tax will reduce any tax that is owing in South Africa.

Please note that it is always best to check the Double Taxation Agreement that exists between South Africa and the country from which you receive your offshore investment income. This agreement may have specific taxing rights for the offshore investment income that you receive that differs from what is set out above.

Also note that the above sets out the general position; there are many variables that may change how your offshore investment income is taxed.

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