[Question] Utilising the s10(1)(o)(ii) exemption

[MrsH]

Please could someone who has claimed a s10(1)(o)(ii) deduction on a tax return provide me with some clarity?

I have a client who was sent overseas for work (by his local employer) for more than 183 days in a 12 month cycle (including a period of more than 60 consecutive days) and I'm trying to find out if he can claim a deduction for the income he earned (locally in ZAR) during the period while he was out of the country. If so, how does this work practically? What does one have to provide to SARS in order to prove this deduction?

Any help with this query would be greatly appreciated.

[CLIVE-TRIANGLE]

If the IRP5 has been coded properly as 3652 (exempt foreign employment income) then it is simple.

If it has been coded 3651 or 3601, answer the wizard questions carefully regarding foreign income and complete the fields as required. Chances are good that it will still be assessed as 3601 or 3651.

In that case you lodge a Notice of Objection. As supporting documents you need a letter from the employer confirming that he was deployed overseas for the relevant periods, and (very important) the amount of remuneration he received for those periods, and copies of his passport showing the exit / entry dates. Ultimately, if it is legit, they will correct it.

Note that it is not a deduction per se; it is a classification of part or all of his income as being exempt from tax. There is no deduction to fill in.

[Simbonile]

Remuneration_ section 10(1)(o)(ii)_ Residence basis of taxation

Hi Guys

I just need clarity on the “remuneration” (exempt amount) I’m supposed to put on the tax return – code 4041 for my client.
I have correctly calculated the days and it is evident that she was out of the country for more than 183 days and for a continuous period exceeding 60 full days
I have read through INCOME TAX INTERPRETATION NOTE NO. 16 but it does not clarify how to work out the remuneration. Do I just put the remuneration for the year?

Tks

[CLIVE-TRIANGLE]

You will need the employer to specify it:

As supporting documents you need a letter from the employer confirming that he was deployed overseas for the relevant periods, and (very important) the amount of remuneration he received for those periods, and copies of his passport showing the exit / entry dates.

[Simbonile]

Thanks a lot CLIVE

[MrsH]

Hi Clive

Thank you very much for your responses on this matter. You mentioned above that if the income was coded 3601 (which it was), that I should "answer the wizard questions carefully regarding foreign income and complete the fields as required".

Were you referring to the wizard question "Did you receive remuneration for foreign services rendered?". If I select this, it brings up "Residency" questions, where you need to confirm how many days you were outside of RSA, etc. Is this the correct section to complete?

Or would one not simply fill the amount (as calculated by his SA employer and documented in a letter for submission to SARS) in field 4041 under Other Deductions, being the box marked "Amounts taxed on IRP5 but comply with exemptions ito s10(1)(o)(ii)"? Filling an amount into this box does not bring up any other questions or fields.

Your help would once again be appreciated.

[CLIVE-TRIANGLE]

Definitely the 4041.

I have always done both. It is just about 100% certain that they will request evidence for the information relating to the foreign periods anyway.