Let’s say the taxpayer is a South African resident who works on a contract in Tanzania, is employed by a Tanzanian company and is therefore taxed in Tanzania. The person does not meet the 183 day rule (of which should be 60 consecutive days) over a 12 month period. What are the tax implications?

The person is “deemed to be exclusively a resident of” the Republic of South Africa (RSA) for purposes of the application of the agreement entered into between the two governments for the avoidance of double taxation.

We have clarified it in the article 14(2) by replacing “contracting state” and “other contracting state” with the relevant countries. You should then be able to interpret the paragraph without undue effort:

“Article 14

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of the RSA in respect of an employment exercised in the United Republic of Tanzania shall be taxable only in the RSA (the first-mentioned State) if:

(a)  the recipient is present in the United Republic of Tanzania for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; and

(b)  the remuneration is paid by, or on behalf of, an employer who is not a resident of the United Republic of Tanzania, and

(c)  the remuneration is not borne by a permanent establishment which the employer has in the United Republic of Tanzania.” 

In essence, a “resident of a contracting state” would be a resident of the RSA, because you stated that the individual is a resident or because of our assumption above.

You are then correct. Tanzania then doesn’t have a right to tax the remuneration to the extent that paragraph 2 applies.

Contact the Tax Consultant Fanus Jonck at tax@jonck.net with your tax queries.