Page 412 - SAIT Compendium 2016 Volume2

IN 34 Income Tax acT: InTeRPReTaTIon noTes IN 34 4. Application of the law
4.1 The wording of section 10 (1) (o) (i) of the Act is analysed and interpreted as follows:
Wording
Interpretation
any remuneration as de ned in paragraph 1 of the Fourth Schedule
‘remuneration’ is speci cally de ned in paragraph 1 of the Fourth Schedule to the Act.
derived by any person as an of cer or crew member of a ship
This will include any person whether South African or not, but in practice it typically refers to of cers and crew members that are South African citizens employed on a ship. Prior to the introduction of the exemption, residents employed on South African ships were subject to tax on remuneration received irrespective of the period of time spent outside the Republic of South Africa. This exemption was inserted to bring the provisions of the Act in line with that of other maritime nations, which exempt their seamen from income tax if they are absent from their country for more than 183 days in a tax year.
engaged in the international transportation for reward of passengers or goods; or
This will include passenger liners and cargo ships travelling in international waters. The transportation must be for reward, otherwise the exemption will not apply. This means that the reward must be a quid pro quo for the conveyance of passengers or goods. The requirement that the ship must be engaged in the business of transportation means that, for example, the transport of sh from the shing ground to the port by a trawler will not constitute transportation ‘for reward’ because the trawler is in the business of shing, and not of transportation.
in the prospecting (including surveys and other exploratory work) for, or the mining of, any minerals (including natural oils) from the seabed outside the continental shelf of the Republic as contemplated in section 8 of the Maritime Zones Act, 1994 (Act 15 of 1994),
This refers to vessels operated by marine mining companies that are involved in mining at sea outside the continental shelf of the Republic of South Africa. The Maritime Zones Act, 1994 refers to the United Nations Convention on the Law of the Sea, 1982, de ning the continental shelf as a distance of 200 nautical miles from the baselines where proof of the existence of geophysical features extending beyond 200 nautical miles, (the Exclusive Economic Zone hereinafter referred to as the EEZ), has not been provided. For further information in respect of the limits of the continental shelf of the Republic of South Africa refer to the limits of the EEZ as depicted in the map provided by the South African Navy Hydrographic Of ce (see Annexure A).
where such of cer or crew member is employed on board such ship solely for purposes of the ‘passage’ of such ship, as de ned in the Marine Traf c Act, 1981 (Act 2 of 1981)
‘Passage’ means navigation through territorial waters in a continuous, speedy and ef cient manner. The exemption will therefore only apply to of cers and crew members, employed on a ship, who are solely involved in the navigation of the ship. It will not include of cers or crew members involved in the prospecting or mining activities of the ship.
if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment;
The borders of the Republic include the territorial waters, which is a belt of sea within 12 nautical miles (roughly 22,2 km) beyond the coastline of the country. Remuneration from services rendered beyond the coastline of the Republic will therefore only be exempt if the services are rendered outside the territorial waters.
The concept of a (full day) means 24 hours (from 0h00 to 0h00). The 183 days do not have to be consecutive or continuous, but a total of 183 days must be exceeded during the year of assessment.
4.2 Notes
4.2.1 4.2.2
4.2.3 4.2.4
Weekends, public holidays, vacation and sick leave spent outside the Republic are considered to be part of the 183 day period of service or contractual period.
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. This means that the exemption does not apply to self-employed persons or ‘independent contractors’ who are not deemed to fall within the provisions of the Fourth Schedule to the Act. If called upon, taxpayers will have to submit some form of documentation to con rm their absence from the Republic. This documentation may include employment contracts and copies of passports.
Where a person who has already complied with the exemption requirements of section 10 (1) (o) (i) 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) (i). The remuneration will be exempt to the extent that it is attributable to the number of vacation or sick leave days credited to the employee in respect of and during the period of
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saIT comPendIum oF Tax LegIsLaTIon VoLume 2