Is the full foreign income exempt or is only the foreign income which falls under the 12 month period exempt? Taxpayer earned foreign income. Meets the 183/60 days criteria. The 12 month period does not fall in the full tax year but ends in it. Is the ful
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
We are not sure to which “June and July” (in the attachment) or ruling you are referring to, but believe it is not relevant in order to provide the guidance.
We accept that the “amount received in respect of foreign services rendered by a SA resident” refers to services rendered outside the RSA and that, if in a treaty country, the treaty doesn’t provide specific relief. The principle, in terms of section 10(1)(o)(ii) of the Income Tax Act, is that the remuneration earned while that person was outside the RSA:
(aa) for a period or periods exceeding 183 full days in aggregate during any 12 months period commencing or ending during that year of assessment; and
(bb) for a continuous period exceeding 60 full days during that period of 12 months,
will qualify for the exemption. The exemption is in respect of those services rendered during that period or periods of absence.
The Act refers to ‘any 12 months period commencing or ending during that year of assessment’ and the practice generally prevailing (see Interpretation note 16) is the following:
“The period must therefore commence on the first day of a particular month, and end on the last day of the twelfth calendar month thereafter.
The 183 day period mentioned above must fall within a period of 12 consecutive calendar months. The 12 month period is not necessarily a year of assessment, a financial year, or a calendar year; it is any 12 month period that commences or ends in the year of assessment in which the remuneration in question may be taxed or exempted.
To identify the 12 month period it is necessary to identify the period during which the services were rendered to the employer and to fit the 12 month period so as to include the period (or as much of it as can fit) during which the services were rendered.”
In summary then, it is the remuneration that accrued to the taxpayer in a specific year of assessment, that relates to services rendered outside the RSA during the 183 and 60 day period (measured in a 12 month period) that qualifies for the exemption. The statement by the SARS official is therefore not 100% correct.