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An Interesting SARS Pension Taxation Ruling, Technically Correct But In Many Ways Inadequate

TaxConnections Blogger Hugo Van Zyl posts about a SARS RulingOn October 3rd, 2013 the South African Revenue Services ( issued BPR 156 (binding private ruling) which ensure some clarity on the taxation of many expats’ pension funds stuck in South Africa.

An interesting ruling, which may be technically correct but in many ways inadequate, writer felt on first read. Perhaps incorrectly? Let’s consider the outcome and value of the ruling.

Like most SARS rulings, it brings clarity but adds several “however” warnings. Before we address them, allow me to summarize the ruling, with an extract:


1. Summary
This ruling deals with the question as to whether and to what extent a pension annuity and a retirement fund lump sum benefit, received by or accrued to a person who is not a resident of South Africa from a pension fund registered in South Africa, will be taxable in South Africa. Read more

REITs – A South African perspective as an OTC investment option

iStock_ Africa Money and Flag XSmallReal Estate Investment Trusts or REITs is a well known internationally known appropriate business structure yet South Africa only adopted its tax law as of April 1st, 2013 and its stock exchange listed or publicly listed trading rules to accommodate REIT’s as of May 1st, 2013.

Since then many property groups not only converted to a listed REIT but also restructured their balance sheets to remove the debt linked to a unit or a share. Now, on September 6th, the first American Depositry Receipt (ADR) status was granted to a South African listed REIT. One ADR unit equals 10 REIT units on the Johannesburg Stock Exchange. Despite the ZA Rand being at a 3 week high, the more recent currency exchange is circa R10=1U$D.

Real Estate Investment Trusts (REIT)

REIT’s are tax transparent or tax through flow investment vehicles that invest in and derive their income from real estate properties and mortgage, without necessarily paying tax on their trade result. To qualify for the South African REIT dispensation, a the REIT (either a company or a trust) must be tax resident in South Africa and be listed as an REIT in terms of the JSE (Johannesburg Stock Exchange) listing requirements.

REIT profits are distributed as tax deductible expenses (effectively pre-tax income) which is then received and taxed in the investors’ hands as taxable dividend income. As of 1 January 2014 the SA dividend withholding tax at 15% or the treaty governed rate where the investor is resident in a treaty country, will apply to nonresident investors. Read more