Assessing the Tax Implications of Foreign Social Security Contributions for South African Expatriates

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Assessing the Tax Implications of Foreign Social Security Contributions for South African Expatriates

• 30 June 2025
• Individuals Tax
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

Question: 

A South African tax resident individual has been seconded to work abroad for a fixed term and is employed directly by a foreign company. The foreign employer is required to make social security contributions to the foreign government. The issue at hand is whether these contributions constitute a taxable benefit that should be included in the individual’s taxable income.

Answer:

The Problem / Facts

A South African tax resident individual has been seconded to work abroad for a fixed term and is employed directly by a foreign company. The foreign employer is required to make social security contributions to the foreign government. The issue at hand is whether these contributions constitute a taxable benefit that should be included in the individual’s taxable income.

Analysis of the Tax Issues Identified

The key tax issue is the treatment of foreign social security contributions in the hands of a South African tax resident. Specifically, the concern is whether these contributions represent a taxable benefit that must be included in the individual’s taxable income.

Relevant Tax Provisions

• Whether foreign social security contributions constitute a taxable benefit
  Section 1 of the Income Tax Act 58 of 1962

• Exemption from income tax in respect of foreign employment income
  Section 10(1)(o)(ii) of the Income Tax Act 58 of 1962

• Taxation of benefits or advantages derived from employment
  Paragraph (c) of the definition of “gross income” in Section 1 of the Income Tax Act 58 of 1962

Application of the Law to the Facts

In terms of Section 1 of the Income Tax Act 58 of 1962, “gross income” includes any amount received or accrued, in cash or otherwise, by a person in respect of services rendered or to be rendered. However, paragraph (c) of the definition of “gross income” specifically excludes amounts received or accrued by an employee in respect of a benefit or advantage derived from employment, if that benefit or advantage is exempt under Section 10(1)(o)(ii).

Section 10(1)(o)(ii) provides an exemption from income tax for foreign employment income earned by a South African tax resident, provided certain conditions are met.

In this case, the foreign social security contributions made by the foreign employer do not constitute a taxable benefit in the hands of the employee, as they are not received or accrued by the individual in respect of services rendered. Even if such contributions were considered a taxable benefit, they would likely qualify for exemption under Section 10(1)(o)(ii), assuming the requisite conditions are satisfied.

Conclusion

Accordingly, the foreign social security contributions paid by the foreign employer should not be included in the South African tax resident’s taxable income.

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