Is remuneration for ship crews exempted from income tax? My client works as a crew member on a cruiseliner for 9 months at a time, and returns to South Africa for a month holiday. Sections 10(l)(o)(i) and 10(l)(o)(iA) deals with ship crews. Remuneration a
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
Section 10(1)(o)(i) applies to “any form of remuneration as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a ship engaged—
(aa) in the international transportation for reward of passengers or goods …”
In terms of the current practice generally prevailing, the exemption applies if “the ship is engaged in the international transportation of passengers or goods for reward.” The ship doesn’t have to be a South African ship (see below).
“Reward” in this context means “compensation received for the transportation of the passengers or goods on the ship. This refers to merchant ships such as cruise ships, passenger liners and cargo ships travelling in international waters …”
In terms of the current practice generally prevailing, the section “exempts any form of remuneration that is derived by a person as an officer or crew member of a ship. In context, this means that there must be a causal connection between the remuneration received, and the person’s role as an officer or crew member on the ship, in order for the exemption to apply. Any remuneration derived outside the Republic other than as an officer or crew member of a ship, does not qualify for exemption under this provision.”
The exemption under section 10(1)(o)(i) applies to “any person” but practically can mean only individuals who are South African residents. It is imperative that you determine where the person is a resident. From the information provided it appears that the individual is ordinarily resident in the RSA.
It is section 10(1)(o)(1A) that refers to a South African – the ship will be a South African Ship if registered in the RSA - see section 12Q(1) of the Act.