Foreign Employment Income -Exemption from Income Tax
The exemption was introduced to prevent double taxation. SARS does have to ensure that this tax exemption is not exploited and thus there are requirements that must be met in order to qualify for the foreign income exemption.
What are the Qualification criteria for the foreign income exemption?
In order to qualify for the exemption the taxpayer must be tax resident in South Africa (South African tax resident) and earn remuneration from employment outside of South Africa. The exemption will only apply if the following criteria is met:
- Remuneration - Salary, leave pay, wage, overtime pay, bonus gratuity, commission, fee, emolument or allowance for services rendered.
- Employment Relationship - The exemption only applies if there is an employment relationship and the services are rendered under an employment contract.
- Services rendered - The remuneration must be in respect of services rendered.
- Outside the Republic - The services must be rendered outside the Republic of South Africa.
- Days Test - The person must be in employment outside the Republic of South Africa for an aggregate of 183 full days or more in a 12-month period.
Frequently asked questions
What are the exceptions to the foreign employment income exemption?
The following categories of employees are excluded from the exemption:
- Public office holders who serve parliament
- Employees of local, national and provincial government and municipal entities
What is the foreign income exemption amount?
The exemption is limited to R1.25 million in respect of a tax year of assessment provided the criteria is met. The balance is taxed in South Africa
Is the entire amount of the exemption applicable?
No. From 1 March 2020, the amount of the exemption that is exempt from taxes is only applicable to the extent that the services were rendered outside South Africa.
What type of income is included in the exemption?
If the employee renders services that result in employment income that includes:
- Salary,
- Leave pay,
- Wage,
- Overtime pay,
- Bonus gratuity,
- Commission,
- Fee,
- Emolument or Allowance.
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