Exemption from Income Tax on Foreign Employment Income

Exemption from Income Tax on Foreign Employment Income


With more and more companies opening operations in Africa and around the world it is imperative that they are au-fait with the Employees Tax legislation on sending employees off-shore. SARS Interpretation Note 16 (issue 2) was published on 2 February 2017 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 are requested to read the legislation to ensure that they are familiar with the qualifying criteria as SARS clearly 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).

In summary, and to ensure that employers are fully aware of their obligations in these situations, it is important to confirm the following.

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 a particular case. 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 it is therefore very important that they ensure that the circumstances of each case are carefully evaluated and that 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 Beattie on [email protected] or 031 582 7410.