Working abroad but coming home, how will I be taxed?

Dear MoneywebTax.co.za

I am confused as to the correct tax law applicable to my situation please help.

There are two items I read in your pages ie,

• "South African tax residents working overseas enjoy an exemption from tax for remuneration received for foreign services, provided that they are outside of SA for more than 183 days (of which 60 are consecutive) in a 12 month period"
• Section 1 of the Income Tax Act defines a "resident" as follows...

I am a South African citizen and I have been working for an Indian company since July 2006. My remuneration is paid into a foreign bank and my services are for the Indian company in India. The company has no interests outside India.

I get 30 days leave per year and normally spend in South Africa. I have only spent on average about 25 days per annum in South Africa and therefore am outside the country for 3 to four periods per year, each exceeding 60 consecutive days and more than 183 every year.

I intend to return to South Africa in September this year.

What tax law is applicable to me and am I liable for tax in SA?

The Indian company subtracts +_ 10% tax.

Answer from Tracy Smith, senior manager | tax at Deloitte & Touche

1. If MoneywebTax's reader is ordinarily resident in South Africa (ie, he regards South Africa as his real home and the place to which he will return from his travels) then he will be a tax resident of South Africa and will be subject to tax in South Africa on his worldwide income and capital gains.
   
2. If he meets the exemption requirements of section 10(1)(o)(ii) his remuneration earned in relation to foreign services rendered, should be exempt from tax. He should meet these requirements if he is outside South Africa for purposes of rendering services, for more than 183 full days, of which more than 60 full days are continuous, during any period of twelve months and those services were rendered during this period.  From what he has indicated it appears that he would meet these requirements. The reader should note that the exemption only applies to the remuneration earned in relation to the rendering of foreign services, and would not apply to the extent that services are rendered in South Africa.
   
3. It is likely that the MoneywebTax community member would be subject to tax in India on the remuneration earned in relation to services rendered there, on the basis that the source of the income is in India.  He should also seek advice in India with regard to any further tax obligations which he may have in that country.  There is a double tax agreement (DTA) between South Africa and India which should apply to allocate taxing rights between the two countries.

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Comments

 

responses to this article

Working abroad tax implications What a P******* reply to an interesting question by John B on July 14 2010, 07:21 Find this comment inappropriate? Report it

Working Abroad - Personal Taxation I agree that this is a very poor, P*******, response. What a waste of good internet space and, more importantly, my time. I feel cheated. Ms. Smith if that is the best you can do - or do not have the time to answer properly,then politely decline . .more the referal from Moneyweb. To Moneyweb Editor - Shame on you for releasing such rubbish. Things need to be tightened up considerably at Moneyweb before it loses credibility. . .less by Peter on July 14 2010, 08:26 Find this comment inappropriate? Report it

Why the whining in the comments? The real question is why was this only asked now and not when the asker first went to work India some years ago? If I took an offshore job, tax would be one of the most important issues to consider lest I be subjected to double taxation or worse. by St on July 14 2010, 10:54 Find this comment inappropriate? Report it

Expat Tax Damned if you do and damned if you don't. Guys there is nothing wrong with the explanation and - a rare blessing these days - it's succinct. by RogertheLodger UK on July 14 2010, 11:25 Find this comment inappropriate? Report it

???? Tracey, you've provided a wonderfully confusing answer.. what do you mean .." does he regard south africa as his home?? do you mean right now while he's away....or at a later date?... here you say that he is subject to SA's tax laws if he does regard SA . .more as his home... then you say... if he stays out of the country for more that 183 days a year.... then he's not subject to tax...... what if he does both??????? DOES HE STILL PAY TAX ...OR NOT..... you've just confused the issue even more..... . .less by Super Duper on July 14 2010, 12:33 Find this comment inappropriate? Report it

Trace reply Good for you Tracy. Seems the whiners want something (a lot) for nothing. The insults from John B, Super Duper and Peter are unwarranted. by ono on July 14 2010, 13:32 Find this comment inappropriate? Report it

@ super duper Tracy's reply is absolutely clear and concise. Point one defines a resident. Point two explains an exemption which applies to residents - so clearly, the questioner does both - he is a resident, and if the exemption applies, then he doesn't pay the . .more relevant tax. I feel all the above criticisms are unwarranted. . .less by zok on July 14 2010, 15:30 Find this comment inappropriate? Report it

@ono come now ono.... we all know she hasn't answered the question... has she?? by Super Duper on July 14 2010, 15:39 Find this comment inappropriate? Report it

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