If you want to avoid mistakes when dealing with international tax, the Practical Tax Loose Leaf Service recommends you stick to these five rules.
Follow these rules to avoid international tax problems
Rule #1: Don't try and hide income from SARS
South Africa is part of a global community. And this means tax commissioners of each country talk to each other and are aware of schemes or methods used by taxpayers to try evade paying taxes, warns the Loose Leaf Service.
Basically, there are no longer any more 'secret states' where you can hide your income. The chances of being caught are extremely high.
So make sure your transactions in another other country are for legitimate reasons and not to 'hide income' from SARS.
Rule #2: Always use the latest double tax treaty
Always get the latest version of the double tax treaty (DTT) between South Africa and the country you'll be transacting in. Make sure you read and understand it.
If you don't understand the DTT and how it could affect your transaction, speak to a registered tax practitioner.
Rule #3: Determine the residency and source of the transactions
If you're carrying on a trade in a foreign country, where you're a resident, ask yourself if there are any specific source rules applicable in that country.
Rule #4: Calculate the estimated taxes due on the transaction so you can budget for them
'If there are no taxes due, then you'll have a calculation, based on double tax treaty and the South African Income Tax Act to prove to SARS and the foreign commissioner if they tax you incorrectly. Always be prepared beforehand,' says the Loose Leaf Service.
Rule #5: Apply the conversion rates correctly
If, for example, you have to use a spot rate, but end up using the average rate, you could end up underpaying tax. And SARS will punish you for this.
If you stick to these five rules you'll be sure to avoid mistakes when dealing with international tax.