We have a query from a client regarding the foreign employment income exemption that is changing from 01 March 2020. She is permanently employed by Amazon in Singapore. She has been living and working there for the past 6 years and only visits SA once a y
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
One must first start with paragraph 1 of Article 4 of the RSA / Singapore treaty to determine when the person will be a resident of Singapore before one can apply the tie-breaker test. Form the information provided it is clear that individual didn’t cease being a resident of the RSA by reason of emigration (no longer ordinarily resident in the RSA). The relevant part of the paragraph reads as follows:
“For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of that person’s domicile, residence, ...”
We don’t know when the person would become liable, or become liable to tax in Singapore and you would need to confirm that. The moment the individual is a resident of both Contracting States, then that individual’s status shall be determined as follows:
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the individual shall be deemed to be a resident only of the State in which a permanent home is available to the individual; if a permanent home is available to the individual in both States, the individual shall be deemed to be a resident only of the State with which the individual’s personal and economic relations are closer (centre of vital interests);
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We don’t know what living in Singapore means, but you’ll notice that the permanent home available in Singapore is the first test. If the individual has a permanent home in Singapore it would not be necessary to look at the centre of vital interest. The OECD commentary explains this as follows:
… regard will be had to his family and social relations, his occupations, his political, cultural or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.
Having a bank account and investments in the RSA may not indicate that the centre of vital interest is in the RSA.