Author: Ryan Nutter
Section 10(1)(o)(ii) of the South African Income Tax Act provides an exemption for foreign employment income received for services rendered outside South Africa, provided specific requirements are met. For your convenience, below are general guidelines to assist employers in handling the payment, taxation and declaration of foreign earnings in line with SARS legislation.
- Exemption details
- Foreign employment income for services rendered outside South Africa are exempt from tax if specific requirements are met. For a detailed breakdown of these requirements please refer to the latest SARS Frequently Asked Questions on Foreign Employment Income Exemption.
- As of the 1st March 2020, this exemption is capped at R1.25 million.
- Any amount above R1.25 million is subject to normal South African tax rates, regardless of whether the income has been taxed in another country.
- Employer responsibilities
- Payroll administration: Due to the complexity of these requirements, foreign earnings cannot be fully automated in payroll systems. Employers need to manually manage these details.
- Documentation: Employers must ensure that employees provide the necessary documentation to qualify for the exemption.
- Advisory role: Employers should keep their payroll administrators informed about any changes affecting the treatment of foreign earnings.
- Employee compliance
- Failure to meet the exemption requirements or to provide proper documentation can lead to additional tax liabilities upon assessment.
Employers should regularly review the latest regulations and ensure their payroll processes are updated accordingly to avoid any compliance issues. Chat to us for more detailed guidance on the employer reconciliation process or refer to the SARS Guide to the Employer Reconciliation Process.