With more and more companies opening operations in Africa and around the world, it is important that they are au fait with employees’ tax legislation when sending employees offshore. SARS Interpretation Note 16 (issue 4) was published on the 28th June 2021 to provide an explanation of the legislation and particularly, the requirements that need to be met for the employee to qualify for the applicable exemption. All employers should read the legislation to ensure they are familiar with the qualifying criteria as SARS places the onus on the employer to make the correct interpretation of any particular deployment / transfer.
In order to qualify for the exemption, a taxpayer must:
- Earn certain types of remuneration (remuneration earned for services rendered),
- In respect of services rendered by way of employment (there must be an employment relationship and an employment contract),
- Outside the Republic (the landmass of SA and its territorial waters – 22.2 km)
- During specified qualifying periods (for a period or periods exceeding 183 full days in aggregate during any period of 12 months, a person must also have rendered services outside the Republic for a continuous period exceeding 60 full days in the same period of 12 months),
- And not be subject to an exclusion (holding of public office).
An employer that is satisfied that the provisions of Section 10(1)(o)(ii) will apply in a particular case may elect not to deduct employees’ tax. In the case where the exemption was not applicable, the employer will be liable for the employees’ tax not deducted as well as the concomitant penalties and interest. It is the employer that bears this risk, and so it is very important that they ensure that the circumstances of each case are carefully evaluated and the correct tax treatment is applied.
Should you have any doubts regarding the interpretation process or require assistance working through this evaluation, please do not hesitate to contact Dave on [email protected].