Page 252 - SAIT Compendium 2016 Volume2

IN 16 Income Tax acT: InTeRPReTaTIon noTes IN 16
If the conditions of the employment contract are met she would have rendered services outside South Africa for a continuous period of 214 days. When the ltering process of the ow diagram in Annexure A is followed, it is clear that she will be entitled to the exemption in terms of section 10 (1) (o) (ii).
(b) Is the employer allowed not to deduct PAYE?
An employer that is satis ed that the provisions of section 10(1)(o)(ii) will apply in a particular case may elect not to deduct employees’ tax in a particular case. Where it is later 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.
(c) What happens in the tax assessment of the employee?
The income from the secondment will still be shown under the relevant code on the IRP 5 certi cate of the employee and must be declared in the relevant section of the employee’s income tax return that deals with income considered not to be taxable. Proof like a passport and an employment contract may be requested from the employee to support the exemption.
(2) Mr X is employed by the South African subsidiary of a multi-national company. Due to his specialised knowledge he was seconded to the New Zealand subsidiary on 1 June 2001 where he worked until 31 December 2001. The subsidiary company in New Zealand remunerated him during the secondment period.
• • • •
He often returned to South Africa and was in South Africa during the following periods: from 27 July 2001 to 31 July 2001 (5 days),
from 5 September 2001 to 9 September 2001 (5 days),
from 11 November 2001 to 15 November 2001 (5 days) and
from 21 December 2001 to 31 December 2001 (11 days).
Question
Is the income derived from the services rendered in New Zealand exempt from income tax in the 2002 year of assessment?
Answer
The number of days during which remuneration was derived from services rendered in New Zealand in the 2002 year of assessment is as follows:
The services rendered in New Zealand were to an employer for the period 1 June 2001 to 31 December 2001. It is clear from the above table that this period includes an aggregate period of 183 days and a continuous period of 60 days which will fall into the 12 month period commencing in the year of assessment, i.e. 1 June 2001 to 31 May 2002 and the 12 month period ending in the year of assessment, i.e. 1 January 2001 to 31 December 2001. The steps in the ow diagram can then be used to arrive at a conclusion, i.e:
(a) Is the taxpayer a person referred to in section 9 (1) (e) of the Income Tax Act? No.
(b) Was remuneration received or did it accrue in respect of services rendered outside the Republic during the year of assessment?
Yes, for the period identi ed in the table .
(c) Was the taxpayer outside the Republic for more than 183 days in total during a 12 month period that commences or
ends during the abovementioned year of assessment?
Yes.
Two qualifying 12 month periods commencing or ending in the 2002 year of assessment can be identi ed. They are – • 1 June 2001 to 31 May 2002; and
• 1 January 2001 to 31 December 2001.
It is clear from the table that both of these periods will encompass a period of absence of more than 183 days outside the Republic. Anyone of them can therefore be used to answer the question.
(d) Was the taxpayer’s absence continuous for more than 60 days during the same 12 month period mentioned above? Yes. Either one of the two 12 month periods in which the 183 days period is present can be used for this purpose.
(e) Were the services rendered during the 183 day and 60 day periods?
Jun
Jul
Aug
Sep
Oct
Nov
Dec
TOTAL
1 June 01 to 26 July 01
30
26
56
1 Aug 01 to 4 Sept 01
31
4
35
10 Sept 01 to 10 Nov 01
21
31
10
62
16 Nov 01 to 20 Dec 01
15
20
35
188
(f)
Yes.
Conclusion
The remuneration from the employer for the services rendered in New Zealand for the 2002 year of assessment is exempt from income tax in South Africa.
(3) The same Mr X was seconded to England from 1 March 2002 to 30 April 2002. He was able to return to South Africa for the Easter holidays (4 days) which included his travelling. The subsidiary in England was responsible for remunerating him on a monthly basis. He worked in South Africa for the rest of the 2003 year of assessment.
244 saIT comPendIum oF Tax LegIsLaTIon VoLume 2