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South Africans working abroad – proposed removal of tax exemption

Wednesday, 16 August 2017   (0 Comments)
Posted by: Author: Jenny Klein
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Author: Jenny Klein (ENSafrica)

On 19 July 2017, the South African National Treasury released the 2017 Draft Taxation Laws Amendment Bill (“draft TLAB”) for public comment. One of the proposals contained in the draft TLAB is the deletion of the exemption for foreign employment income contained in section 10(1)(o)(ii) of the Income Tax Act, 1962 with effect from 1 March 2019. 

In terms of this exemption, any remuneration received by or accrued to a South African resident in respect of services rendered outside South Africa for or on behalf of any employer, is exempt from income tax provided that the employee was outside South Africa for more than 183 full days, and for a continuous period exceeding 60 full days, during any period of 12 months and where such services were rendered during those periods outside South Africa. If these requirements are met, the foreign remuneration of the South African resident will be exempt from tax in South Africa. This exemption applies irrespective of whether the remuneration is taxed in another jurisdiction.

The foreign remuneration exemption was introduced in 2001 when South African tax residents became subject to tax on their worldwide income, in order to ensure that South African tax residents were not subject to double taxation of the same employment income in South Africa and the country of source where the services were rendered. 

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