Tax when working abroad

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A Fin24 user working in Afghanistan wonders about his tax due. He writes:
 
I am a South African citizen and working in Afghanistan.
 
I understand that if I am out of the country for 186 days including, one 62 day period, then I do not have to pay any tax.
 
Do I have to declare the amount earned to the South African Revenue Service (Sars)? If I do, could they then tax me on that amount?
 
Elzahne Henn, associate director at Mazars responds:
 
For purposes of this response I have assumed that the individual in question is a resident for tax purposes in South Africa and have not broken tax residency in South Africa.  
 
A South African tax resident will generally be taxable on his worldwide income.
 
However, a foreign employment exemption is available, provided that requirements of section 10(1)(o)(ii) of the Income Tax Act are met.
 
In terms of section 10(1)(o)(ii) of the Income Tax Act, remuneration received or accrued to any person for services rendered outside of South Africa will be exempt if the following requirement are met:
 
* The individual must be in an employment relationship (evidenced by a contractual relationship);
 
* The remuneration must be earned for services rendered outside of South Africa. Accordingly, remuneration relating to days worked in South Africa will remain taxable in South Africa;
 
* The services may be rendered on behalf of any employer. It is not restricted to a South African employer and it can services rendered to a foreign employer;
 
* The individual must render services outside of South Africa for a period or periods exceeding 183 full days - that is at least 184 days) in any 12-month period commencing or ending during that year of assessment. The period of more than 183 days need not be consecutive;
 
* The individual must render services outside of South Africa for a continuous period of more than 60 full days - that is at least 61 days during that 12-month period;
 
* The 12-month period referred to is not aligned to the South African tax year, but must include consecutive calendar months. At least one calendar month must fall within the tax year during which the exemption is sought.
 
In summary:
 
It is not evident from the facts provided whether the individual is in an employment relationship or an independent contractor.
 
Provided that the he is in an employment relationship the remuneration should qualify for the foreign employment exemption and will not be taxable in South Africa, provided that the services are rendered in Afghanistan during the mentioned periods of absence.
 
Although the income may qualify for the foreign employment exemption, same must still be disclosed on his/her annual income tax return, but as income exempt from tax.  The annual income tax return makes provisions for the amount of income exempt from tax in terms of section 10(o)(ii) of the Income Tax Act to be disclosed separately.

- Fin24

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