Tax on UIF contribution reimbursement

[kavesh]

I have a client who is a non resident working in South Africa. He receives a salary from the company he works for as well as the parent company overseas. He pays tax on both his salaries in South Africa.
Recent changes to legislation to UIF means he has to contribute to UIF even though he will not derive any benefit from it as his work permit is only applicable while he is employed where he is employed currently.
His parent foreign company has agreed to reimburse him the amount of the UIF in his foreign salary. He would like to know whether he will be taxed on this reimbursed amount.

I would suggest that he will have to pay tax on this as it will form part of his taxable income.

He is very pedantic and would need to know which income tax act would need to be followed whether its taxable or not.

Sorry guys its a bit of an odd one this....

Thanks
Kavesh

[EAB]

Hi Kavesh,

Based on the reimbursement he will not be taxed on it as he is taxed on his gross salary before the deduction of UIF. For example on a salary of R1 000 his tax would be R100 (just for this example) and his UIF will be R10. The tax is calculated on the R1 000 and the deduction of UIF doesn't have any effect on the tax. UIF is not a deduction before tax is being calculated and should then not be taxable if reimbursed.

[kavesh]

Hi EAB

Thanks for the reply.

Would the same principle apply when he is reimbursed the UIF from his parent company overseas. Remember he receives a local salary as well as a salary from overseas paid in foreign currency. He thinks they may just add it to his gross salary.