I was asked if a person qualifies for tax exemption on foreign income in the following circumstance:

“My foreign contract was from 12 January 2015 to 1 May 2015. However, I was in the UK from 4 January 2015 to 30 June 2015. This is a period of 179 days. I therefore did not qualify for the exemption since it was less than 183 days. However, during October 2014 I worked in Zambia for a period of 19 days. That was unrelated to the foreign income that I earned for the above-mentioned contract. I did not earn foreign income in Zambia; I was paid through my normal South African salary.

If these extra days are added to my contract time I was out of the Republic for 194 days during a period of 12 months. Would it therefore be appropriate for me to apply for the tax exemption on foreign income for the 2015/2016 tax year? If so, would I apportion the deduction between the 2015 and 2016 assessments? Should I for example include my foreign income for January and February and deduct it as exemption in the 2015 year of assessment?”

Answer:

Yes, you will meet the requirements to apply for tax exemption on a part of your income. The exemption will be applied to the salary or remuneration you earned while abroad. Therefore, the salary you earned while in the UK and the salary you earned while in Zambia will qualify for exemption. It does not matter where you are paid from – all that matters is that you were out of the country for the required number of days during any 12 month period.

Again, don’t apply the exemption to all of your income – only exempt that portion of your remuneration that you earned while you were actually abroad. Your last paragraph is correct – you must apply the exemption (not a deduction) to income you earned (while abroad) during the 2015 and 2016 tax years.

Just keep the necessary schedules to show SARS how you calculated the exempt part of your income and have a copy of your passport available to prove entry and exit dates.

Contact the tax consultant Fanus Jonck regarding your tax queries at tax@jonck.net.