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Variation on tax on earnings while abroad

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(Shutterstock)
(Shutterstock)

A Fin24 user lives with his wife who works abroad and wants to know about tax on his earnings for a South African company. He writes:

I've read a few Fin24 articles about working abroad and being tax exempt if one works outside the country for most of the year.

My question is: If I'm living outside the country with my wife, who works abroad, I am also abroad for over 300 days in the year. However, I offer my services to a South African company.

Is there any way I can be exempted from tax if they pay me as an international employee and deposits US dollars into a bank account abroad? (Seeing as I am technically working abroad.)

This would be the opposite of rendering services for an international company, while staying in South Africa, for which I would be taxed.

READ: Tax on earnings while working abroad

The technical department at the SA Institute of Tax Professionals (Sait) responds:

Our response assumes that you are a tax resident of South Africa (specifically when the tax treaty between South Africa and the country that you live in is taken into account).

If you are deemed to be exclusively a resident of the other country for purposes of the application of the treaty, South Africa would not have a right to tax the income in respect of the services rendered in the other country.

We also accept that you are not deriving the remuneration as an officer or crew member of a ship.

The exemption from South African normal tax that you refer to applies to amounts received by (or accrued to) any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance. It includes fringe benefits, allowances and share options.

READ: Taxing South Africans working overseas

There are a number of requirements before the exemption applies:

- The receipt (or accrual) must be in respect of services rendered outside South Africa by that employee for or on behalf of any employer. So services rendered by an independent consultant would not qualify.

- The words “any employer” means an employer which could either be an employer operating in South Africa, or a non-resident employer.

With regards to the period that an employee was outside South Africa, the requirements are that it must have been for a period or periods exceeding 183 full days in aggregate during any period of 12 months and for a continuous period exceeding 60 full days during that period of 12 months.

Of course the services must have been rendered during that period or periods of absence.

The 183 day period mentioned above must fall within a period of 12 consecutive calendar months. The 12 month period is not necessarily a year of assessment, a financial year or a calendar year.

It is any 12 month period that commences or ends in the year of assessment in which the remuneration in question may be taxed or exempted.

If the services rendered meet the above requirements, the exemption will be available.
The fact that the payment may (or may not) be made in a foreign currency is irrelevant as far as the exemption is concerned.

You are correct that services rendered in South Africa to a non-resident employer will be taxed in South Africa.

ALSO READ: Tax rules for South Africans working abroad

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