Seafarer Tax Exemption: Navigating Section 10(1)(o)(i) for Yacht Crew Working Abroad

Seafarer Tax Exemption: Navigating Section 10(1)(o)(i) for Yacht Crew Working Abroad

• 01 June 2025
• International Tax
• The Tax Faculty Tax Specialist

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

Question: 

A South African taxpayer is employed by the owner of a yacht and works aboard this yacht in the Mediterranean Sea. The taxpayer is outside South Africa for more than 183 days per annum. The question is whether the taxpayer qualifies for the seafarer exemption under section 10(1)(o)(i) of the Income Tax Act.

Answer:

The Problem / Facts

A South African taxpayer is employed by the owner of a yacht and works aboard this yacht in the Mediterranean Sea. The taxpayer is outside South Africa for more than 183 days per annum. The question is whether the taxpayer qualifies for the seafarer exemption under section 10(1)(o)(i) of the Income Tax Act.

Analysis of Tax Issues

This case raises several important tax considerations in determining whether the seafarer exemption applies:

• Vessel Classification: Whether a yacht qualifies as a "ship" for the purposes of the exemption.
• Nature of Employment: Whether working on a private yacht constitutes "seafaring" within the meaning intended by the legislation.
• Geographical Requirement: Compliance with the stipulation that services must be rendered outside the Republic.
• Time-Based Requirement: Whether the 183-day threshold outside South Africa has been met.

Tax Issues and Applicable Legislation

Key provisions of the Income Tax Act 58 of 1962 under consideration include:

• Qualification for the seafarer exemption – Section 10(1)(o)(i)
• Definitions of "ship" and "seafaring" – Section 1
• Definition of "resident" and determination of days spent outside the Republic – Section 1
• Interpretation guidance – SARS interpretation notes and administrative commentary

Applicable Law

Section 10(1)(o)(i) of the Income Tax Act provides an exemption for:

"remuneration received by or accrued to any person in respect of services rendered outside the Republic as a member of the crew of a ship engaged in the transport of passengers or goods in international waters or waters outside the Republic."

The key requirements are:

• Services must be rendered outside South Africa;
• The individual must be a crew member of a ship;
• The ship must be engaged in the transport of passengers or goods;
• Such transport must occur in international waters or waters outside South Africa.

Definitions in Section 1 are relevant when interpreting the term “ship” and other related maritime terminology.

Application of Law to Facts

• Yacht as a “ship”:
  A yacht may qualify as a “ship” for tax purposes if it fits the general description of a vessel capable of navigation. The Act does not expressly limit the exemption to commercial vessels.

• Crew member status:
  The taxpayer, being employed to work on the yacht, may be regarded as a crew member, regardless of whether the yacht is operated for private or commercial purposes.

• Transport of passengers or goods:
  This presents a potential limitation. SARS has previously adopted a narrow view, generally requiring evidence of commercial transport activities. A purely recreational yacht might not satisfy this requirement. However, if the yacht provides charter services or transports individuals (such as the owner and guests), there may be scope to argue compliance.

• Geographic compliance:
  Working in the Mediterranean meets the requirement for services to be rendered outside the Republic and potentially in international waters.

Conclusion:

While the time-based and geographical requirements of section 10(1)(o)(i) appear to be satisfied, the main obstacle to the exemption is whether the yacht’s use qualifies as transport of passengers or goods. If the yacht is used solely for the owner’s private recreation, this may disqualify the taxpayer. However, if any form of passenger transport or charter activity occurs, even occasionally, there may be a basis to argue eligibility.

In light of the potential uncertainty and SARS’ narrow interpretation, it is advisable to obtain a formal tax opinion to reduce the risk of understatement penalties (USP).

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