October 27 2020

COVID-19 Pandemic: South Africa Reduces the 183-Day Rule on the Foreign Remuneration Exemption

Source: IBFD Tax Research Platform News

The 183-day threshold requirement for the foreign tax remuneration exemption has been reduced to 117 days. In terms of the current provisions of section 10(1)(o)(ii) of the Income Tax Act (ITA), individuals who spent more than 183 days working outside South Africa would have qualified for exemption in respect of their remuneration earned while working outside South Africa. However, due to travel bans during the COVID-19 pandemic, these individuals could not travel in order to work outside South Africa, and therefore could not qualify for the above exemption.

The National Treasury indicated in its response document to Parliament that it had introduced changes to section 10(1)(o)(ii) of the ITA in order to take into account the lockdown period during the COVID-19 pandemic. In terms of the proposed changes that have been made in the 2020 draft Taxation Laws Amendment Bill, 66 days that commenced on 27 March 2020 and ended on 31 May 2020, when South Africa operated under COVID-19 alert level 5 and 4 restrictions, should be subtracted from the 183-day threshold rule used to determine the eligibility for exemption of foreign remuneration.

In order to qualify for this exemption, the number of days that a person spent working outside South Africa will be reduced to more than 117 days (i.e. from more than 183 days) in any 12-month period, for years of assessment ending from 29 February 2020 to 28 February 2021.