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Is foreign income taxable?

If you’re one of the many South Africans who receive income from a foreign country, you may have asked yourself whether it’s taxable in South Africa and whether you should declare it in your South African tax return.

To answer this question, it is important to remember that the South African income tax system is based on the following: If you’re considered to be a South African resident (for tax purposes), you will be taxed in South Africa on all the income you receive, whether the source is local or foreign. Should you have a South African passport and regard South Africa as your regular place of residence, the likelihood is that you will fall into this category and be taxed on your worldwide income.

Many South Africans who work abroad, regard South Africa as their regular place of residence. They usually work overseas for a set period of time before returning to South Africa. If you fall in this category, section 10(1)(o)(ii) may apply to you: Should you be outside the borders of South Africa for more than 183 days, 60 of which were continuous, the income you receive from that foreign income source will be considered exempt for tax purposes in South Africa.

You are still required to declare this income on your tax return, though. Interestingly enough, the above section does not stipulate that the 12 month travel cycle should correspond to the South African tax cycle. You may therefore use any 12 month travel cycle as long as at least one day falls within the South African tax cycle.

If your travel cycle does not fulfil the requirements as set out above, your foreign income will be included in your taxable South African income and taxed at South African tax rates. However, you will be able to use the foreign tax already paid on this income as a tax credit on your tax calculation.

Should you receive income from various income sources (including foreign sources), we recommend that you contact a qualified tax consultant who can advise you on a number of possible tax scenarios.

For more information please contact Alro de Swardt of Tenk Loubser & Associates on 021 852 0382 / alro@exceedsw.co.za.

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