South African taxpayers working outside South Africa can enjoy some temporary relief from the South African Revenue Service (SARS) to alleviate any difficulties caused by the travel restrictions imposed last year as part of the hard level-five lockdown.
“Covid-19 has cut a swathe of destruction through the economy, affecting life and livelihoods. Among the consequences, the severe level-five lockdown affected the travel arrangements of many individuals,” says Megan Landers, manager of international tax at specialist tax and transaction advisers, AJM Tax.
The Income Tax Act provides a tax exemption for residents who work outside South Africa for more than 183 full days in a given 12-month period, of which 60 of those days need to be continuous.
“To accommodate the fact that many people were not able to travel, the 183-day exemption requirement has been reduced to 117 days, although the 60 consecutive day requirement remains intact. This is still for a given 12-month period,” Landers says.
She points out that South African tax residents are taxed on their worldwide income, which includes income earned abroad. “Provided the above two requirements are met, the first R1.25 million of foreign employment income is exempt from tax, based on recent tax amendments. Any income earned above the threshold will then be taxed based on the normal income tax tables and rules,” Landers says. She says the R1.25 million threshold applies from 1 March 1, 2020; before then, all remuneration for work done abroad was exempt.
“The relaxation is not permanent in nature. It applies only to the 2020/21 year of assessment. Fortunately, the fiscus realised the need for positive intervention,” Landers says.
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