According to section 10(1) (o)(i) will a taxpayer add his sick leave days he spent in the Republic to qualify for the exemption? I Would like to find out What is the correct interpretation of this section s10 (1) (o): My client is a Resident of SA.
Important:
This answer is based on tax law for the year ending 28 February 2017.
Answer:
As a first comment we need to point out that section 10(1)(o)(i), which applies (amongst others) to “any person as an officer or crew member of a ship” doesn’t have a 60 days’ requirement. It applies “if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment.”
In terms of the current practice generally prevailing, “… sick leave spent outside the Republic are considered to be part of the 183 day period of service or contractual period.” Note – Interpretation note 34 was issued as a draft and may be finalised during the year. You may want to check to make sure that the practice generally prevailing didn’t change in the final version (the draft for instance refers to calendar days).
Where a person who has already complied with the exemption requirements of section 10(1)(o)(i) in a year of assessment, spends sick leave in South Africa during the same year of assessment, “the remuneration received by the person during the period of leave will continue to be exempt from tax in terms of section 10(1)(o)(i). The remuneration will be exempt to the extent that it is attributable to the number of vacation or sick leave days credited to the employee in respect of and during the period of service outside South Africa under a vacation or sick leave scheme operated by the employer.” The point is that the person must then have met the 183 day outside the RSA requirement. The sick days leave spend in the RSA will not count towards this. The ‘already’ used in the current practice prevailing refers to the fact that the person have met the section 10(1)(o)(i) requirements.
The requirement “was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment” doesn’t not refer to the person being employed during that period. There is also no treaty between the RSA and Angola – i.e. nothing to provide differently.