A South African citizen has just been employed by the United Nations. He has been informed that his income from the UN is not taxable due to the ratification agreement from South Africa, and that he does not need to confirm to the Non-resident ruling of 1
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
If we accept that the services are rendered in the RSA, section 10(1)(c) is applicable (and not section 10(1)(o) that you refer to) – it provides an exemption in respect of salary and emoluments, (in this instance probably items (iv) – (vi)) of the Income Tax Act. It generally then applies to “any salary and emoluments payable to any subject of a foreign state” who is either temporarily employed in the RSA or not ordinarily resident in the RSA. The other requirement is that “the exemption of such salary and emoluments is authorized by an agreement entered into by the governments of such foreign state” or the relevant institution and the RSA. If the client is a resident of the RSA this would not be available (we accept that citizen implies the person is ordinarily resident in the RSA).
The Convention on the Privileges and Immunities of the United Nations, in section 18, states that. “Officials of the United Nations shall:
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…;
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Be exempt from taxation on the salaries and emoluments paid to them by the United Nations …”
The general position is that, where it is agreed in any agreement between the country, the RSA, and such an international entity, that the exemption is incorporated in the relevant Act. We’ve seen that for VAT, and we see that in section 18A (recent amendments) to allow for the deduction to be made. In a sense, this requires approval by the host country (or the host country must be a signatory of the agreement.
It appears, from what was stated to the individual, that this agreement is meant to apply in lieu of the Act. We understand that employees, in similar instances, obtain a letter from the employer to confirm that. One would then treat the income as such (exempt), and if queried by SARS, provide them with the letter from the UN.