QUESTION 2.4

Eric Sithole is a South African Airlines (SAA) pilot, who flies the route between South Africa and Dubai. He is considering making Dubai his home. He enjoys rebuilding American muscle cars in his spare time, and is currently restoring a 1969 Dodge Charger. The car is currently in Dubai, due to the availability of spare parts in the region. Eric came to you as he is unsure of the changes to his tax position should he decide to emigrate. He has asked you to prepare a comparison of his gross income position should he remain a resident of South Africa and the position should he be classified as a non-tax resident in South Africa. Eric spent 4 months of the 2019 year of assessment in South Africa. Eric has provided the following information:

Salary from SAA R1 000 000

Interest (fund situated in South Africa) R150 000

Interest (fund situated in England) R50 000

Dividends (South African companies) R27 000

Dividends (foreign companies) R10 000

Proceeds on disposal of South African shares R85 000

Royalties R50 000

Income from consulting advice R18 000

1. Eric has contacted SARS regarding the source of the taxpayers salary. SARS has indicated that it will treat this income as being from a South African source, irrespective of where Eric is resident.

2. The royalties relate to a training manual that Eric wrote. The training manual serves as a guide for the new Airbus A380 aircraft, which is being used on certain routes. R30 000 of the royalties relate to the use of the manual in the Netherlands, while R20 000 of the royalties relate to the use of the manual in South Africa. 3. Eric earned R18 000 in consulting advice that he provided to Air France at their offices in Paris.

Eric is a 41-year-old male.

REQUIRED TO:

Discuss and compare the total gross income of Eric Sithole, assuming he had been either a resident or non-resident of South Africa. Provide brief reasons for the inclusion or exclusion of amounts where appropriate. You may ignore the possible effect of any applicable double tax agreements.