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A Fin24 user wants to know how South Africans working overseas are taxed. He writes:
How is tax calculated for South Africans working overseas?
I heard rumours from other South Africans that if you work 186 days (63 days must be consecutive) out of South Africa you are exempt from paying tax.
Is this true and what else should I take into consideration?
Pieter Faber, technical executive: tax law & policy at the SA Institute of Tax Professionals (Sait), responds:
Section 10(1)(o)(ii) of the Income Tax Act does indeed provide for a tax exemption for remuneration such as salary, wage, bonus, commission, earned by an employee in respect of services rendered outside South Africa for any employer in terms of his or her employment contract.
All the remuneration that the employee earns outside South Africa during that period will only be exempt if the employee is outside South Africa for a period exceeding 183 days, of which 60 days were continuous, during any 12 months period.
This 12 month period is, therefore, not a calendar year and can apply over two separate tax years, exempting the income earned from the foreign employment for parts of these years if over the 12 month period the requirements are met.
This exemption will not apply in respect of employment income earned while in South Africa and also does not apply to other forms of income such as interest received or rental income from leasing property.
It is important to ensure that if the employer is resident in SA, then the foreign employment income should be disclosed under IRP 5 code 3651 and not the normal salary code of 3601.
The SA Revenue Service (Sars) provides more details in Interpretation Note 16 provides on the requirements and provides examples of how the exemption should be applied, including the 12 month period where the qualifying exemption days of 183 and 60 are over two separate tax years. Read the Sars note here.
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