The foreign employment income exemption and the impact of the travel ban

South African tax residents are taxed on their worldwide income, which inherently includes income procured abroad. However, there is relief. 

Section 10(1)(o)(ii) bears good news, should you meet the said requirements. 

To qualify for this exemption, a resident must render services outside South Africa for more than 183 full days in a given 12-month period outside of South Africa, of which 60 of those days need be continuous.

Provided that these two requirements are met, only the first R1.25 million of foreign employment income is to be exempt from tax liability. Any income earned above the threshold will be taxed based on the normal income tax tables and rules. 

* To note, the monetary limit applies from 1 March 2020, before that time, the entire portion of income for services rendered abroad was to be seen as exempt. 

The Covid 19 travel ban impact 

Temporary relief for the years of assessment of 2020 and 2021

Covid 19’s most seen implication was travelling; South Africa announced a lockdown Level 5 which severly impacted the travel arrangements of many individuals. During the pandemic, individuals could not travel abroad in order to qualify for the above-mentioned required days – which has adverse consequences. 

Fortunately, there has been some relaxation was announced in this regard to cater for these undesired outcomes. 

The 183-day requirement has been reduced to 117 days, although the 60 consecutive day requirement remains intact. This is still for a given 12-month period. 

The relaxation is not permanent in nature, and merely finds application for the 12-month period commencing on or after 28 February 2020 and ending on or before 28 February 2021 – therefor implying that only the 2021 year of assessment returns can be based on the aforementioned. 

Fortunately, the fiscus realises the need for positive intervention. 

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