Exemption for foreign salary earners

South African tax resident individuals are liable to income tax on their worldwide income. In other words, where a South African tax resident individual were to earn a salary for employment which may from time-to-time be exercised outside of the borders of the Republic, that income earned is still included in that South African tax resident individual’s gross income.

An exemption is available though to South African employees where the extent of the services rendered abroad are significant.[1] The exemption is however limited to income earned in the form of remuneration from an employer and only to the extent that the remuneration received is for those services rendered abroad. In terms of the relevant provision, salaries earned in whatever form for services rendered outside of South Africa will be exempt from income tax in South Africa where the employee has been absent from the Republic for:

  • At least 184 days during a 12-month period (in other words for more than 50% of a 1-year period); and
  • More than 60 days of the above will have continuously been spent beyond South Africa’s borders.

As above, it is important to appreciate that it is not the entire salary earned by the employee for the year of assessment which will be exempt from South African income tax. The exemption is limited to only so much as relates to services rendered abroad. In other words, to the extent that the salary is earned for services that will be rendered in South Africa, that portion of a salary earned will still be taxable in South Africa.

The exemption is typically applicable to employees seconded for periods of time to render services abroad. It is quite likely that even though the income earned may be exempt from South African income tax, that the country in which the services are rendered will seek to levy tax on the employee’s income based thereon that the source of the income earned will be in that other country.

It is therefore possible for employees to benefit from the exemption on foreign earned salaries, whilst also paying very little income tax in the other country, if such a country is one with very low individual income tax rates (typically countries in the Middle East, such as Dubai). This incidence of “double non-taxation” has recently drawn the attention of National Treasury, and the Minister of Finance warned in this year’s Budget Speech that South Africa is considering rescinding the exemption if the other country in which the employment services are rendered does not seek to significantly tax the income earned by the employee.

[1] Section 10(1)(o)(ii) of the Income Tax Act, 58 of 1962

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Changes to the dispute management process

The South African Revenue Service (SARS) recently introduced certain changes and improvements to its current dispute management process.

Any taxpayer who is aggrieved by any assessment may request SARS to provide those reasons for the assessment sufficient to enable the taxpayer to formulate an objection. For the first time, taxpayers will be able to make such a request for reasons for an assessment electronically via eFiling or at any SARS branch. This automated functionality will be available for personal income tax (PIT), corporate income tax (CIT) and value-added tax (VAT). Where a valid request for reasons has been identified by the SARS system, the period that an objection can be lodged will be automatically extended to the period permitted by the Dispute Resolution Rules issued by SARS in terms of section 103 of the Tax Administration Act.[1]

The new dispute management process will also introduce a separate condonation workflow whereby the taxpayer will be allowed to submit a Request for Reasons, Notice of Objection (NOO) or Notice of Appeal (NOA) after the periods prescribed by the Dispute Resolution Rules have lapsed. Previously, the condonation process was included in the actual dispute process. To the extent therefore that a dispute was treated by SARS as invalid (as opposed to not being allowed to proceed as a result of a late submission), taxpayers were confused as to the outcome of the dispute and what the next available step in the dispute process was. The new automated condonation process therefore allows SARS to attend to requests for condonation for the late submission of the relevant notices or requests before attending to the dispute itself. This will ensure that the late submission is aligned with the legislation as it will prevent situations where the dispute is simply classified as invalid merely because the relevant submission is late (quite often automatically).

Taxpayers will also now be able to request SARS to suspend certain payments of VAT pending the outcome of a VAT dispute via eFiling or at a SARS branch similar to the requests for suspension of payments that were already implemented for PIT and CIT in 2015.

eFiling will furthermore be made an entirely guided process to ensure that the dispute is submitted according to legislative requirements and to eliminate any invalid disputes from being submitted to SARS.

The take-away is that SARS regards these changes as part of its ongoing commitment to delivering a better service to taxpayers. The changes to the dispute management process are therefore aimed at aligning the process more closely with the relevant legislation, to remove uncertainties that existed with regards to the dispute process and to make the process easier to follow.

[1]28 of 2011

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

Nwanda Internal News
(June 2017)

Nwanda news

Awesome Rewards were awarded to the following staff this month:

  •  Shaista Ebrahim for working hard and meeting deadlines.
  • Kavitha Bhawanideen for overall good work.
  • Sumita Vasudev for excellent work and meeting deadlines.
  • Ntshepeng Tshotetsi for stepping up to the challenge and doing an excellent job.

New staff members:

A warm welcome to Nothando Nkosi,she has joined Bob’s team as an audit senior.

New Employee

Farewell to staff member:

We bid farewell to Melishia Engelbrecht, we wish her the best in her future endeavours.

Good luck for the exams:

Esmeralda Lottering is writing the June ITC exam and we wish her all the best.

 Donation to charity:

Casual day money that was collected and Nwanda donated R2000 to Gift of the Givers towards their Knysna and Western Cape disaster relief project.

More about them can found on their website:

http://www.giftofthegivers.org/disaster-relief/south-africa/1137-2017-disaster-relief-sa/knysna-and-western-cape-disasters/6652-gift-of-the-givers-knysna-update

We urge you to contribute your money for casual days so that we can continue to contribute towards more worthy causes.

Announcement:

Congratulations to Patricia, she gave birth to a baby boy on 24 June.

Motivation

Submit your 2017 Income Tax Return and avoid penalties

Annual Tax season is here, and Income Tax return submissions begin 1 July 2017. We’ve taken the liberty of answering frequently asked questions individuals may have. The South African Revenue Service (SARS) has allocated different submission deadlines dependant on the manner of the submission.

What are the submission deadlines for Income Tax Returns?

Please pay careful attention to the deadline applicable to you:

  • 22 September 2017 for manually submitted returns;
  • 24 November 2017 for returns submitted electronically at a SARS branch or via e-filling; or
  • 31 January 2018 for returns submitted by provisional taxpayers via e-filling.

Companies are exempt from the abovementioned dates, as they are required to submit their returns within 12 month their financial year, via e-filing.

Who is required to submit, and who is exempt?

The threshold in respect of individuals required to submit a return is provided below:

  • Every individual who is a resident and had capital gains that exceeded R40 000;
  • Individuals whose gross income exceeded
  1. R116 150 (if older than 65 but under 75 years) or
  2. R75 000 (if under 65 years),
  3. R129 850 (if older than 75)

A natural person, or a deceased’s estate is exempt from submission if their gross income consists solely of any one or more of the categories below;

  • Remuneration does not exceed R350 000 from a single source (including allowances);
  • They did not receive a car allowance or other income;
  • They received interest income from a source within South Africa that does not exceed:
  1. R23 800 (if you are younger than 65 years) or
  2. R34 500 (if you are 65 years and older);
  • They received dividends and were a non-resident during the 2017 year of assessment; and
  • received or accrued an amount from a tax-free investment.

What are the necessary supporting documents? 

  • IRP5/IT3(a) certificate(s) from your employer or pension fund;
  • IT3(b) and (c) certificates for investment returns; such as interest, dividends and/or capital gains/losses
  • Financial statements (if applicable);
  • Medical aid contribution certificates and receipts for out-of-pocket medical expenses
  • ​Completed confirmation of diagnosis of disability form (ITR-DD) (if applicable)
  • Retirement fund certificates (pension, provident and retirement annuities);
  • Logbook and other documents in support of business travel expenses;
  • Bank account details; and
  • Any other relevant income and deduction information.

To curb penalties and interest related to late submission, we strongly recommend collating the respective documents in preparation for submission to SARS as soon as possible. Should you require assistance with your Income Tax return, please contact our offices.

For further information regarding South African Taxation, please get in touch with us via the contact information below.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)