Application of the foreign employment remuneration exemption in section 10(1)(o)(ii) - Days test? The tax payer works as a qualified chef working outside South Africa and has since 2008 has applied the days test in accordance with SARS’s current interpre
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
The issues that you require guidance on is both dealt with in the current practice generally prevailing (issue 2). With regard to the 12-month period it states that:
“A person is entitled to look both forwards and backwards over any period of 12 months, meaning that some periods may overlap. If the first month in this test does not meet the requirement of the 183-full-days and 60-continuous-full-days, the following month can be looked to, and worked forward or backwards – meaning that the prior month that was looked at first, will be taken into account again in assessing whether the days test was met for the second month.”
“Although the first or last day of a month, and a full month, is used in the explanation above, that is simply for illustrative purposes. Because a 12-month period can commence or end on any day in the month, the 12-month period could commence, for example, on the 12th of a month and end on the 11th of that month in the following year. The test could therefore also be applied on a daily basis, which means that a person can consider a 365- or 366-day period looking both forwards and backwards from any specific day.”
Note, the period of 12 months is not necessarily a year of assessment, a financial year, or a calendar year; it is any period of 12 consecutive months. The remuneration however, that is exempted by this provision relates to amounts earned from services rendered outside the RSA, if the days tests were met during “any period of 12 months”. The Act refers to the services rendered outside the RSA during the periods of absence.
With regard to leave, the position is that:
“Calendar days must be looked at, not only work days, when calculating whether a person has been outside the Republic for 183 full days.
Weekends, public holidays, annual leave days, sick leave days and rest periods (as required under the specific terms of a contract of employment) that are spent outside the Republic are taken into account for purposes of calculating the period or periods outside the Republic.”
Interpretation note 16, issue 2, didn’t in our view, change the practice in this regard when compared to the previous version thereof.