A taxpayer receives income from the United Nations. The following information was received from the Tax Office of the World Bank Group in Washington: SA is a signatory to the Convention relating to Specialised Agencies (the United Nations and the World Bank). South Africa has acceded to the Convention on the Privileges and Immunities of the Specialized Agencies. In doing so, South Africa has agreed not to impose income tax on the WBG salaries and emoluments of WBG officials. The exemption is described in Article VI, Section 19(b) and states that WBG officials shall "enjoy the same exemptions from taxation in respect of the salary”. Will the taxpayer’s income from the United Nations be exempt from tax in South Africa?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
We submit that section 10(1)(d) doesn’t apply – the exemption of an entity will not apply to amounts that accrue to an individual in respect of services rendered to the entity. Because the services are rendered in the RSA, section 10(1)(c) 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’ll see that this would not be available. Certain officials of the United Nations are exempt from taxation on their salaries. 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”. This is a bit of a grey area, but this agreement is meant to apply in lieu of our Act. I understand that employees, in similar instances, obtain a letter from the employer to confirm that the exemption applies. 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.