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The section 10(1)(o)(ii) foreign service income exemption

29 October 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: An individual is employed by a South African company and as part of his employment contract is required to render services some of which some are rendered in South Africa and some outside of the borders of the Republic. If the taxpayer spends more than 183 days outside of South Africa of which at least 60 are consecutive can I apply the section 10(1)(o) exemption and if so would it only pertain the income earned outside of the Republic or all employment income from the said employer?

A: We agree with you that based on the number of days absence the taxpayer meets the section 10(1)(o)(ii) requirements and the income would be exempt from normal tax in the RSA. You are also correct in your interpretation regarding the resident status of the employer.  

The exemption applies in respect of "services rendered outside” the RSA.  In terms of proviso C and for the purposes of section 10(1)(o)(ii), where remuneration is received by or accrues to any employee during any year of assessment in respect of services rendered by that employee in more  than one year of assessment, the remuneration is deemed to have accrued evenly over the period that those services were rendered.  We submit that the foreign source part can also be determined on a basis of time spend (apportioned).  

SARS deals with section 10(1)(o)(ii) in its Interpretation Note No. 16.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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