Page 250 - SAIT Compendium 2016 Volume2

IN 16 Income Tax acT: InTeRPReTaTIon noTes IN 16
Practical application
In identifying the possible 12 month periods that
may be used, it is advisable to rst identify the period during which the services were rendered to the employer (employment period). A rst twelve month period can then be determined by working forward 12 months from the rst day of the calendar month in which the rst day of the employment period falls. If this twelve month period fails to meet the requirements for the exemption, another 12 month period may be used by working back 12 months from the last day of the calendar month in which the last day of the employment period falls. As can be seen, there is an option of making use of any one of two 12 month periods. Also see Annexure A and Annexure C.
Wording
Interpretation
for a continuous period exceeding 60 full days during that period of 12 months
There must be an absence of more than 60 continuous days in the same 12 month period mentioned above.
and those services were rendered during that period or periods
The services that generated the income to be considered for exemption must have been rendered during the 183 day and 60 day periods mentioned above.
in transit ... between two places outside the Republic
This means that the point of departure and the point of destination of the speci c journey that is being undertaken must be outside the borders of the Republic, as described above.
the provisions of this subparagraph shall not apply in respect of any remuneration derived in respect of the holding of any of ce or from services rendered for or on behalf of any employer, as contemplated in section 9 (1) (e)
The exemption does not apply to employment income earned by persons mentioned in section 9 (1) (e) of the Act.
4. General observations
4.1 Although the entire 183 day (or more) period of absence from the Republic need not be continuous, the 60 day period must be continuous.
4.2 Weekends, public holidays, vacation and sick leave spent outside the Republic are considered to be part of the days during which services were rendered during the 183 day and 60 day periods of absence.
4.3 The person’s absence must have been to render services for or on behalf of his or her employer in terms of an employment contract, which means that the exemption will not apply to self-employed persons or independent contractors.
4.4 The taxability of remuneration earned before the commencement of years of assessment commencing on or after 1 January 2001 (in practice, remuneration earned by natural persons before 1 March 2001) should be determined in terms of the legislation applicable prior to the introduction of the residence basis of taxation.
4.5 If called upon, taxpayers will have to submit some form of documentation to con rm their absence from the Republic. This documentation may include secondment letters, employment contracts from foreign countries, and copies of passports. This documentary proof will assist in the veri cation of the period or periods worked outside the Republic.
4.6 Where a person who has already complied with the exemption requirements of section 10(1)(o)(ii) in a year of assessment, spends vacation leave or sick leave in South Africa during the same year of assessment, the remuneration received by the person during the period of leave will continue to be exempt from tax in terms of section 10 (1) (o) (ii) to the extent that the remuneration is attributable to the number of vacation or sick leave days credited to the employee in respect of and during the period of service outside South Africa under a vacation or sick leave scheme operated by the employer that is similar to vacation or sick leave schemes that generally prevail in the South African business community for persons employed in South Africa.
4.7 The potential for an exemption under section 10 (1) (o) (ii) does not automatically waive the liability of an employer to deduct employees’ tax in terms of the Fourth Schedule to the Act. An employer that is satis ed that the provisions of section 10 (1) (o) (ii) will apply in a particular case may, however, elect not to deduct employees’ tax in a particular case. Where it is found that the exemption was not applicable the employer would be held liable for the employees’ tax not deducted as well as the concomitant interest and penalties.
4.8 An exemption under the provisions of section 10 (1) (o) (ii) does not mean that an employer or an employee is absolved from liabilities under the Unemployment Insurance Contributions Act 4 of 2002 or the Skills Development Levy [sic] Act 9 of 1999. These two Acts do not provide for the same exemption.
Law Administration
South African Revenue Services
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