Page 253 - SAIT Compendium 2016 Volume2

IN 16 Income Tax acT: InTeRPReTaTIon noTes IN 16
Question
Is the income derived from the services rendered in England exempt from income tax in the 2003 year of assessment?
Answer
The number of days during which remuneration was derived from services rendered outside South Africa in the 2003 year of assessment is as follows:
The services rendered in England were to an employer for the period 1 March 2002 to 30 April 2002.
The steps in the ow diagram can then be used to arrive at a conclusion.
(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 1 March 2002 to 30 April 2002.
(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 2003 year of assessment can be identi ed. They are —
• 1 March 2002 to 28 February 2003; and
• 1 May 2001 to 30 April 2002.
It is clear from the table that the taxpayer was not outside South Africa for an aggregate period of 183 days during the 12 month period 1 March 2002 to 28 February 2003. This period can therefore not be used.
It will therefore be necessary to consider the 12 month period ending in the year of assessment, i.e. 1 May 2001 to 30 April 2002. Based on the information in example 2 above, the periods during which services were rendered outside South Africa during this 12 month period are as follows:
March
April
TOTAL
1 March 2002 to 28 March 2002
28
28
2 April 2002 to 30 April 2002
29
29
57
M
J
J
A
S
O
N
D
J
F
M
A
1 Jun 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
3 Jan 20 to 31 Jan 02
29
29
1 Mar 02 to 28 Mar 02
28
28
2Apr 02 to 30Apr 02
29
29
TOTAL
274
It becomes clear that whereas the initial 12 month period could not exempt the income from England in the 2003 year of assessment, the alternative 12 month period could exempt the same income. This highlights the necessity to work forwards and backwards when calculating the 12 month period.
It is clear from the table that this 12 month period will encompass a period of absence of more than 183 days outside the Republic.
(d) Was the taxpayer’s absence continuous for more than 60 days during the same 12 month period mentioned above?
Yes, from 10 September 2001 to 10 November 2001.
(e) Were the services rendered during the 183 day and 60 day periods?
Yes.
Conclusion
Based on the answer in (e), the remuneration derived from services rendered in England for the 2003 year of assessment is exempt from income tax in South Africa.
ANNEXURE C
SUGGESTED PRACTICAL APPROACH FOR DETERMINING THE MOST SUITABLE 12 MONTH PERIOD
(f)
From the above examples the following standard approach may be adopted when dealing with a practical situation:
(1) Identify the amount of remuneration that was received or accrued from a particular employer for services rendered
outside the Republic in a year of assessment.
(2) Identify the period(s) of employment in that year of assessment in which the remuneration was earned.
(3) Consider exempting the remuneration for the identi ed period of employment by following the steps below.
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