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Tax rules for South Africans working abroad

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A Fin24 user working in Malawi is not sure about double tax and when he will qualify for certain tax exemptions. He writes:

Can you please tell me if there is a double tax agreement between Malawi and SA.

Do I have to be out of the country for 63 consecutive days in a year? I was at the Klerksdorp tax office and they said no. I would like a second opinion.

Pieter Faber, technical executive: tax law & policy at the SA Institute of Tax Professionals (Sait), responds:

To qualify for the section 10(1)(o)(ii) exemption in respect of foreign employment income, the requirements are that services must be rendered 183 days outside of SA for an employer of which more than 60 days must be continuous.

Both these "days" requirements must be fulfilled "during any period of 12 months". Therefore, the 12 months are not a calendar or tax year, but any period of such 12 months against which the conditions must be tested.

In practice this is done by testing the accrual of remuneration for each month in such a 12 month period, which results in retrospective testing and exemption as the 12 month period applies per accrual per month and is therefore a "rolling period".

For example, if the employee renders qualifying services outside SA from February 1 2013, then at the end of February 2013 the amount will not qualify for the exemption.

However, if the foreign services are supplied continuously until the end of August 2013, then in the 12 month period from September 2012 until August 2013 the employee would have complied with the 183 days and more than 60 days requirement for February 2013.

He or she would also then have qualified for the exemption in respect of all the months until the end of August 2013.

Such remuneration will now be exempt from income tax, but in two separate tax years, namely for the 2013 tax year ending 28 February 2013 in respect of the February 2013 remuneration and in the 2014 tax year ending 28 February 2014 for the remuneration earned from March 2013 to August 2013.

This period can also run over two calendar years, for example from August 2013 to July 2014, as long as the amount to which the exemption is to apply is in such 12 month period and the 183 and more than 60 days are also in that period.

As to the double taxation agreement with Malawi, South Africa does indeed have such an agreement, which can be accessed on website of the SA Revenue Service (Sars) here.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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