Breaking News: Changes to Foreign Earned Income Tax Exemption in South Africa

We have today been informed of important changes to the 183/60 rule in South Africa affecting yacht crew.

The South African Revenue Service (SARS) has announced plans, which have been under discussion for some time, to amend the current taxation exemption for foreign remuneration.

Currently, any income earned by South African tax residents whilst working abroad is exempt from taxation provided certain requirements are met.

Exemption Requirements

  1. The individual must not exceed 183 days in South Africa in any 365 day period. This does not refer to calendar or tax year but any given 365 days.
  2. During the 183 days which are allowable as time spent in South Africa, the individual must complete at least one period of 60 days continuous employment as a crew member or officer.
  3. The income which the exemption will be applied to must be earnt under contract of employment i.e. as an employee. This exemption does not apply to sole traders or sub-contractors.
  4. The income is earnt whilst physically outside of South Africa.

The changes, which take effect from 1st March 2020, will mean that the exemption is lowered to cover only the first 1 million Rand for all South African tax residents working overseas, other than yacht crew.

It is important to note that following the implementation of the legislation, you will need to establish a new qualifying period 1st March to the following February, in which the above requirements are met, in order to make a claim.

Fortunately, the SARS have decided that yacht crew can still claim full exemption for their income providing you meet specific requirements for qualification as a “Crew Member”.

Learn More About Foreign Earned Income Exclusion

Qualifying Crew Member Exemption Rules

For the purposes of the exemption a crew member must:

  • Remain under contract of employment whilst on the vessel.
  • Be solely employed to assist with the navigation of the vessel.

Any South African tax resident who meets requirements laid out above, both in terms of days in the country and as a member of the crew of a vessel, may claim full exemption for the income earnt whilst physically outside the country, over and above the 1 million Rand limitation applied to other foreign earners.

It is however, stipulated that the exemption will only apply to income from days which are actually worked.

This means that income from sick days or leave will not be exempt and will be taxable.

Ideally, you contract of employment should state that your salary covers only actual working days and you are not paid for time which you are not working.

The final item to note is that this exemption will not be automatically applied.

If you wish to claim your tax-free allowance, you must lodge a tax return with the SARS with full details of your position.

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Liked this article? Try reading: Yacht Crew Tax & Financial Information - Your Ultimate Guide

Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein

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