Companies that organise events for visiting sportsmen or entertainers to SA will be required to notify the tax authorities within 14 days of signing a deal under new tax plans recently released by the South African Revenue Service (SARS).
The tax regime for visiting entertainers and sports people is to be tightened due to the low level of compliance by the introduction of a final withholding tax.
Organisers of sporting and entertaininment events will be required to withhold tax at the rate of 15% from payments made to sportsmen and entertainers, failing which they will become personally liable for the tax.
The withholding tax will be a final tax and there is no need to file an income tax return, said Johan Troskie, a director at Deneys Reitz Tax Services.
Troskie was speaking last week at a conference in Johannesburg on the draft Revenue Laws Amendment Bill.
There will be no opportunity for either party to claim tax deductions, Troskie said.
For instance, an Australian golfer who wins $1m in a one-week competition in SA would have 15% ($150000) deducted by the host company, who would pay the amount over to SARS. The golfer would be paid $850 000.
The host would have to pay over the withholding tax within 14 days..
As it is likely that these sports people and entertainers will be taxed on such income at higher rates in their own countries, SARS will give them tax certificates to enable them to claim tax relief back home.
SARS recognised that its ability to collect taxes from foreign sportsmen and entertainers has not been as effective as it should be due to a number of practical constraints. This has lead to an erosion of the tax base in favour of the country of residence of the visiting sports person or entertainer, Troskie said.
The rate of 15% is much lower than the existing highest individual marginal rate of 40% and the corporate tax rate of 29%.
Sanchia Temkin SARS tightens up tax on foreign entertainers pay
Business Day 21 November 2005-11-21
For text: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A115991
FMF Policy Bulletin/ 22 November 2005