Tax on payment in overseas currency

(Shutterstock)
(Shutterstock)

A Fin24 user is not sure how to have money he earned in a foreign currency successfully transferred into rand. He writes:

I require advice on the following, please:

If I do “freelance” work on the internet to supplement my income and get paid in US dollars, how will I be taxed when I transfer these funds to my bank account and have it converted to rand?

Do I require any permission for doing this type of work and/or to transfer these funds to SA?
I am a South African citizen, living and working permanently [in SA].

READ: SA tax after emigrating to Australia

The technical department at the SA Institute of Tax Professionals (Sait) responds:

From the facts provided we accepted that the services (the freelance work) are rendered in South Africa. We also accept that when you say you are “a SA citizen, living and working permanently” that you imply that you are a tax resident of South Africa.  
 
The "income" derived from the "freelance work" will be gross income in South Africa and therefore potentially subject to normal tax.
 
As a natural person you may elect that all amounts received by or accrued to (or expenditure or losses incurred by) you in any currency other than the currency of South Africa, be translated to the currency of South Africa (rand) by applying the average exchange rate for the relevant year of assessment.

If this election is not made, the foreign currency amounts must be translated to rand by applying the spot rate on the date on which that amount was so received or accrued or expenditure or loss was so incurred.
 
There is nothing in the Income Tax Act that provides that you must obtain permission before the work is undertaken.
 
We are not sure what you mean with “transfer these funds to SA”. Essentially that is not a tax question, but if we assume the money is first banked abroad, the repatriation thereof is dealt with in terms of the exchange control regulations – see paragraph 4.3 of section K of the Exchange Control Manual.

These questions can best be answered by an authorised dealer (such as your bank).

ALSO READ: Variation on tax on earnings while abroad

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