Foreign players to pay SA tax
Johannesburg - One local institution set to win from the country’s hosting of the 2010 FIFA World Cup is the South African Revenue Service (SARS).
While SARS has granted certain tax concessions on the supply of goods and services relevant to hosting the tournament, foreign soccer players will not be exempt from tax, and measures have been put in place to ensure their taxes are collected.
As a norm, South Africa taxes non-residents on a source basis – meaning that receipts from sources within the borders of the country are subject to tax. Applying the source basis, earnings received by foreign sportspersons from activities they perform in SA are thus subject to tax.
SARS has recognised the challenge of collecting the tax on these earnings, given the short period players will be present in SA, as foreign rugby and cricket players have escaped paying any form of tax on earnings for their performances during previously staged rugby and cricket world cups.
But practical tax collecting problems have now been rectified and Di Seccombe of audit, tax and advisory firm Mazars said SARS will be collecting in 2010.
Tax legislation now places the obligation on the South African resident paying foreign sportsmen undertaking a so-called specified activity to withhold tax at a rate of 15%. "A 'specified activity' is defined in the Income Tax Act as any personal activity undertaken by the foreign sportsperson in South Africa, whether alone or with other people," said Seccombe.
"Any South African resident failing to withhold the correct amount of tax and pay it over to SARS within 30 days will find themselves personally liable for the taxes owing. Theoretically, the SA resident will then need to recover the taxes paid from the foreign sportsperson."