A new withholding tax system will come into effect from 1 August 2006 for entertainers and sportspersons who are not resident in South Africa for income tax purposes.
Previously foreign entertainers and sportspersons were taxed on income derived from their performances in South Africa on a similar basis to South African residents. This system proved to be impractical in light of their very short stays in the country.
In terms of the new withholding tax system, event organisers, producers and others who make payments to foreign entertainers and sportspersons for performances in South Africa on or after 1 August 2006 will have to withhold a 15% tax from these payments.
Where it is not possible for the withholding tax to be imposed the foreign entertainer or sportsperson is liable for the payment of the 15% tax.
Reporting requirements have been introduced to ensure that the South African Revenue Service (SARS) is informed beforehand of performances. A resident who agrees to found, organise, or facilitate a performance for reward, is required to notify SARS of the performance within 14 days of concluding the agreement.
The withholding tax system was announced in the 2005 Budget and included in the Revenue Laws Amendment Act, 2005. It takes effect on 1 August 2006 in terms of a proclamation by the President to be published in the Government Gazette on Friday, 28 July 2006.
The withholding tax system is not intended to give an unfair advantage to foreign entertainers and sportspersons who are employed for extended periods of time.
Foreign entertainers or sportspersons will, therefore, continue to pay tax on the same basis as other employees if they are:
The withholding tax system is consistent with international practice and the agreements for the avoidance of double taxation that South Africa has concluded with other countries. It will be administered by SARS' Non-Resident Entertainers and Sportspersons Team. The team may be contacted as follows:
Post: Private Bag X187
Facsimile: +27-11-602 2934
Further details of the withholding tax system are to be found on page 100 of the Revenue Laws Amendment Act, 2005, and page 35 of the Explanatory Memorandum to the Revenue Laws Amendment Bill, 2005. Both documents are available under the Legislation section on the SARS website, www.sars.gov.za.
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE