We have a client that works for the UN. She is ordinarily resident in SA and has not been out of SA for more than 183 days. Our client is of the opinion that her income earned from the UN is exempt as per article IX of the convention of privileges and imm
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
Your view may be correct. We don’t know if the reference to ‘article IX’ is correct.
If the services are rendered in the RSA, section 10(1)(c) of the Income Tax Act is applicable. 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. You said that the person is a resident of the RSA this exemption would not be available.
Section 18, under Article V, states that “Officials of the United Nations shall … be exempt from taxation on the salaries and emoluments paid to them by the United Nations”.
It appears, from what was stated by 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. Or obtain a ruling from SARS.