The taxpayer worked in MOZAMBIQUE for a South African company on a contract, the taxpayer was told by the employer to come back to SA , which resulted the taxpayer not meeting all the requirements of 10(1)(o)(i), but he has met 60 days requirement and the
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
For purposes of the guidance that follows, we accepted that the country involved is Mozambique. We are not sure what you mean with “the taxpayer will have a shortfall of the remuneration he received which was not taxed”.
From the additional facts, it is also accepted that the individual derived the amounts as an employee. In terms of Article 14 of the treaty between the RSA and Mozambique, both countries have a right to “salaries, wages and other similar remuneration derived by a resident” of the RSA in respect of an employment if the employment is exercised in Mozambique.
The RSA provides relief for any double tax that arises, but only under the circumstances provided for in section 10(1)(o)(ii) of the Income Tax Act. The remuneration envisaged in section 10(1)(o)(ii) must be received or accrued “by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance…” The period of absence from the RSA must then include a continuous absence of 60 days and an aggregate absence of 183 days – both must fall within a period of 12 consecutive calendar months.
With regard to the employer, the current practice generally prevailing is as follows:
“The potential for an exemption under section 10(1)(o)(ii) of the Act does not automatically waive the liability of an employer to deduct employees’ tax in terms of the Fourth Schedule to the Act. An employer that is satisfied that the provisions of section 10(1)(o)(ii) will apply in a particular case may, however, elect not to deduct employees’ tax in a particular case. Where it is found that the exemption was not applicable the employer would be held liable for the employees’ tax not deducted as well as the concomitant interest and penalties.”