South African employers had till 31 May 2016 to issue the 2016 IRP5’s. If you are working abroad, please check that your employer has used the correct code. If your employer used the normal salary code of 3601, then you will not be able to get a Section 10(1)(o)(ii) exemption from the SA Revenue Services.

Section 10(1)(o)(ii) of the Income Tax Act exempts any remuneration received by or accrued to a person if it is in respect of services rendered outside of South Africa for or on behalf of any employer provided that the services were rendered while the person was outside South Africa for:

• a period or periods exceeding 183 full days in aggregate during any twelve-month period; and
• a continuous period exceeding 60 full days during that twelve-month period.

In order to qualify for tax exemption the taxpayer must:

• spend the number of days outside South Africa as stipulated above;
• render the work/services abroad; and
• not be an independent contractor or a self-employed person.

The taxpayer is required to provide the following supporting documents:

• employment contract;
• the calculation stipulating the number of days worked abroad in tabulated form; and

the passport confirming the taxpayer’s absence from the country if he/she is audited or supporting documents are required. The remuneration from the foreign employment must be reflected under the relevant code on the taxpayer’s IRP5 certificate. The IRP5 code for this non-taxable income is 3651. If the IRP5 code is incorrect, taxpayers will experience difficulty in claiming this exemption. The reason code for the non-deductibility of tax in the case of exempt foreign income is 4105. Employers should distinguish between income earned abroad and income earned while in the Republic by using code 3651 for qualifying foreign source income and code 3601 for remuneration that does not qualify for the exemption. The exemption is not applicable to all remuneration, but only to income received or accrued while working outside of the Republic.

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