UAE Double Tax Agreement - Layman Version

Understanding Your 2025 South African Tax Position: A Simple Guide

- SARS is continuously working to make tax compliance easier for South Africans, aiming to be a smart and modern organization. The following information highlights key changes for the upcoming 2025 tax season, applicable to individuals both living in South Africa and those working abroad.

Important Dates for Your 2025 Tax Filing

Key Updates for South Africans Working or Living Abroad (and Residency Changes)

- These changes are particularly important if you have international income or have changed your tax residency status.

Better Use of Foreign Tax Credits (Section 6quat):

- What’s new? From March 1, 2025, you can fully use foreign tax credits for taxes you’ve paid on capital gains in another country. This means if you paid tax on a capital gain (like selling property or shares) in a foreign country, you can use that credit against the South African tax on the same gain, to the same extent.
- Carry-forward: Starting from the 2025 tax year, any unused foreign tax credits will automatically be carried forward for up to six years, making it easier to claim these credits in future.

Managing Your Tax Residency (Section 9H):

- Customized Tax Returns: From the 2025 tax year, when you file your ITR12 (income tax return) or IRP6 (provisional tax return), SARS will provide a specific version based on your registered tax residency status.
- Resident vs. Non-Resident: If you’re an RSA tax resident, you’ll get a “resident wizard” questionnaire. If you’re a non-resident, you’ll get a “non-resident wizard” questionnaire.
- Changing Residency: If you ceased to be an RSA tax resident during the tax year, you will be presented with both the resident and non-resident questionnaires to ensure accurate reporting. The same applies to IRP6 returns.
- Reinstating Residency: If you stopped being an RSA tax resident in the past and are now reinstating it, the Registration, Amendments, and Verification Form (RAV01) will allow you to clearly state your “Reinstatement Date of RSA Tax Residency”.

Reporting Foreign Interest and Dividends:

- Foreign Interest Expenses: A new line item has been added to the tax return under “Foreign Interest” to allow you to declare “Allowable interest expenses incurred in the production of interest received,” aligning with Practice Note 31.
- Exempt Foreign Dividends: New source code 4307 has been introduced for reporting exempt foreign dividends within the non-taxable section of your ITR12 tax return. There’s also a new source code (4306) for exempt local dividends.

Important Updates for All South African Taxpayers

- These changes apply broadly to individuals and specific entities within South Africa.

New Definition for Provisional Taxpayers:

- Labour Brokers: With effect from March 1, 2025, labour brokers who have an approved certificate of exemption will now be considered provisional taxpayers. This means they must meet provisional taxpayer requirements, including submitting IRP6 tax returns.

Trust Income Changes:

- Communal Estate Rule: From the 2025 tax year, if you are married in community of property and declare income from a trust, SARS will automatically apply a 50% communal estate split to that income.

Employer-Reported Deductions (Sections 11(nA) and 11(nB)):

- New Codes: From March 1, 2025, employers must report specific details related to Sections 11(nA) and 11(nB) of the Income Tax Act (ITA) on your IRP5/IT3(a) certificate. This means you will see new source codes: 4042 for Section 11(nA) and 4058 for Section 11(nB) (under “Other Deduction”) on your ITR12 tax return.

Reporting Backdated Salaries and Pensions:

- New Source Codes: If you receive backdated (antedated) salaries or pensions, new source codes 3623 and 3673 have been introduced on the ITR12 tax return for these specific types of payments.

Learnership Agreements (Section 12H):

- Extended Incentive: The tax incentive under Section 12H of the ITA for Learnership Agreements, which was set to end, has been extended until March 31, 2027. This means employers can continue to claim deductions for learnerships for longer.

Interest Exemption for Deceased Estates (Section 10(1)(i)):

- Executor Clarity: For deceased estates, the executor will now be able to specify the exact “Interest Earned Date From” and “Interest Earned Date To” within the investment-income section of the deceased estate tax return. This helps ensure the correct Section 10(1)(i) interest exemption is applied, especially if the interest earning period goes beyond the year the taxpayer passed away.
- Handling Unused Tax Balances (e.g., donations, medical credits):
- Verification Note: If you have unused balances (like Section 11F, Section 18A, or Section 20 amounts) that aren’t automatically carried over to the next year, SARS will print a note on your ITA34 assessment. This note will explain that your return is under verification review, and SARS will adjust your return to include these carry-over amounts once the review is complete.

Easier Banking Details Updates:

- Select from Verified List: To improve your experience when updating banking details on the Registration, Amendments, and Verification Form (RAV01) or your ITR12 tax return, SARS will now present you with a list of your pre-verified banking details. You will simply select from this list instead of having to manually type in your details.

Disclaimer