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Income tax codes for working outside SA

Aug 20 2015 22:05

Cape Town - To help make the filing process as seamless as possible Fin24 has joined forces with the SA Institute of Tax Professionals (SAIT), to answer users' tax questions as far as possible.

User question: Our company (SA registered) sent six resident South African expats to a mining project in Angola to render services for our company to an Angolan mining company in February and March this year.

Initially it was a three-month contract and has now spilled over into a three-year contract. The expats will comply with the 180- and 60-day rule of exemption before the end of the year.

To start with we paid then “grossed up” tax to enable them to earn the calculated Angolan packages. Subsequently we kept their SARS income number as if in SA and reflected the extra salary and tax as “bonus”. SARS indicated the number is incorrect and the bonus method also.

Question 1. When should we have used the correct “exempt income code” and can we fix it now? (right at the start?)

Question 2. Was there another method than "grossed up" tax and can we apply it now?

Question 3. How can we rectify the method and what would you prescribe with specific reference to the bonus method we applied?

Piet Nel, SA Institute of Tax Professionals responds:

The matters raised are quite complex and you may well want to consult a tax practitioner in this regard.  

With regard to the amounts payable to the employees due to the ‘gross-up’ principle we submit that SARS may be correct that it is not a bonus. It may well not make any difference to the tax consequences, but it is probably more likely to be additional salary. 

We accepted that the employees had no obligation to refund the company if the tax overpaid was refunded to them on assessment.  

The employer was correct in withholding employees’ tax, particularly in respect of February. 

The current practice prevailing (Interpretation note 16) is that “an employer that is satisfied that the provisions of section 10(1)(o)(ii) will apply in a particular case may, however, elect not to deduct employees’ tax in a particular case.”  

The correct codes to use on the employees IRP5 would be the ones that include a “5” – for instance code 3651 MUST only be used for foreign services income. If the wrong code was used the IRP5 can be re-issued and the employer will have to re-submit the February reconciliation.  

We can’t comment on other methods that can be used. 

* Have a question? Send it to us and we will find an expert to answer.

PLEASE NOTE: The important deadline dates in the 2015 tax season are:

September 30 2015: Manual/postal submissions
November 27 2015: At a SARS branch (non-provisional)
November 27 2015: eFiling (non-provisional)
January 29 2016: Provisional taxpayers via eFiling

ALSO SEE previous tax questions from users:

Can interns claim for travel expenses?

Home care and medical rebates

What to do when tax docs burn

Expat receiving pension from SA: Do I pay tax?

What are the limits on claiming travel expenses?

Can I claim for using my own car for work?

Temp teaching for 6 months, must she pay tax?

Working in Saudi, do I also pay tax in SA?

Can I claim for travel expenses?

Tax filing: No financial records yet, what now?

Filing returns for an education trust

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.

sait  |  tax filing season 2015  |  money clinic  |  tax
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