SARS will only allow a taxpayer to claim a limited amount of any taxes, deducted offshore on foreign income and investments, as tax credits on the taxpayer’s tax return in South Africa.  The amount of foreign taxes that SARS will allow the taxpayer as a credit for taxes paid is governed by strict formula but it is, basically, limited to the amount of tax that would have been levied had the income been earned in South Africa.  The amount of the foreign tax deducted offshore that may be claimed here in South Africa is known as the s6quat limit and this allowable tax credit amount is treated by SARS as a rebate along with the taxpayer’s primary rebate and along with a taxpayer’s medical tax credits.  If any tax is deducted offshore on foreign capital gains transactions then the formula for calculating the s6quat limit becomes more complicated but WinTax handles all cases with ease.  You must just remember to enter the foreign CGT taxes deducted offshore in the correct field under code 4114 in both WinTax and on the ITR12.  DO NOT enter foreign capital gains tax deducted offshore in the same field as other foreign taxes deducted offshore on income from other foreign sources.

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