The general rule is that SA tax residents are taxable on their worldwide income. However, section 10(1)(o)(ii) provides a specific exemption for remuneration earned for services rendered outside SA if an employee spends more than 183 full days (including a continuous period of more than 60 full days) outside SA in any 12-month period during which those services are rendered outside SA.
Most foreign countries will tax the employment income of individuals who are earning income from employment in their country on a PAYE type system. The purpose of this exemption was to provide relief to SA tax residents from paying tax, both in the country where the services were performed as well as in SA. The 183 day and the 60 continuous days’ test, exempted SA residents from being liable for tax on the same income in SA, their country of residence.
However, many individuals are employed in countries where the employment income of foreign nationals is not subject to tax. These individuals would therefore pay no tax on that employment income, either in SA or in the foreign country where the services are rendered. This is obviously unfair and results in a situation of double non taxation. This goes against the intention of the exemption which was to provide relief against double taxation of the same income and not to provide double non taxation of the remuneration from foreign services.
In order to end the situation of double non taxation of foreign employment income, the section was amended in the Taxation Laws Amendment Act of 2017 with effect from 1 March 2020.
Initially it was intended to repeal the section in totality. However, after impassioned representations by affected individuals to National Treasury, the proposal was revised and the section continues to allow the first R1million of foreign remuneration to remain exempt from tax in SA if the individual meets the requirements of section 10(1)(o)(ii) in relation to that remuneration.
The effect is that if an individual earn remuneration exceeding R1-million from foreign services, the portion exceeding R1-million will be included in the person’s SA taxable income and taxed at the person’s applicable personal income tax rate.
It is important to note that this exemption is applicable to persons who are still considered tax residents of SA although they are performing services outside SA.
The practical implication of this for SA resident individuals is as follows:
1. If the individual in foreign employment earns more than R1-million, in a country where they have not been paying tax on remuneration from those foreign services, it is likely that they will be taxable on this income in SA.
2. If an individual in foreign employment earns more than R1-million, in a country where they have been paying a lower amount of tax on that remuneration than they would have in SA, it is likely that they will be taxable on the difference in tax in SA.
3. If that person was already paying the same or more employees’ tax in the country where the services are rendered, and now becomes liable for tax in SA, this might result in double taxation.
4. In situations where double taxation is possible because the individual is already paying tax in the country where the services are being performed, relief in terms of the foreign tax credit sections of the Income Tax Act or the application of a DTA are likely to be available.
5. If an individual is eligible for foreign tax credit or relief under a DTA, a directive would need to be obtained from the South African Revenue Service (SARS) to request relief from SA tax to the extent that a rebate in respect of the foreign taxes paid on that remuneration is available. In such cases, it is important that the individuals take advice on how to apply for these directives and to understand whether these must be applied for annually.
The change only impacts individuals who are South African tax residents. Many South African nationals working abroad are already non-resident from a tax perspective and will not be affected. In such cases the individual might have to provide evidence to SARS that he or she is not ordinary resident in SA. This is far easier to evidence when a person financially emigrates but it can apply with a change of intention to become an ordinary resident of the foreign country.
South African nationals working abroad are encouraged to obtain professional advice to enable appropriate planning and the assessment of any impact that the new rules may have on their future tax liability. It is not a one size fits all situation and specific advice on an individual’s personal situation should be taken. Many South Africans might already have already broken their SA tax residence and be in a better situation than they believe they are.
There is still time before March 2020 to put practical steps in place to ensure that relief from any potential double taxation has been arranged with SARS.
STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19
By Alex Balcombe, Partner at Harris Balcombe
The last few weeks has seen businesses in hospitality, tourism, retail, leisure and more forced to close their doors following the Government’s orders that they should close to prevent the spread of coronavirus.
While this is expected to flatten the curve and reduce the number of coronavirus cases, it will of course have an impact on businesses and employees alike. For small businesses especially, there are many concerns about how they can claim on their insurance to weigh the fall of this impact.
In response to calls to help struggling businesses, the Government has informed the public that companies who are facing turmoil will be able to claim on their business interruption insurance during this difficult time. For most, this is wrong.
The insurance industry has also been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period. This isn’t strictly true either.
How can businesses see through the mixed messaging and best secure their future and their livelihoods and reduce money worries? It’s an extremely stressful time for many companies, and confusion over whether or not they can be covered can only cause more unnecessary stress.
Since it’s a new disease, most businesses will not be covered for business interruption due to COVID-19. In fact, the vast majority of policies do not cover anything related to COVID-19.
That said – don’t rule out the idea that you may be covered. There is a chance that you will be covered against COVID-19, but not know it. This is a very small chance, but your current cover may already protect your business against the consequences of coronavirus, and the nationwide response to it – though those with this cover are unlikely to realise it.
How Could I Be Covered?
Not everyone has business interruption insurance, as it’s not a legal requirement. It is entirely up to the policy holder to weigh up the benefits of having it, and their ability to trade should a disaster happen.
To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:
Infectious Disease Extension
Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. As it is a new disease, these policies will not have included COVID-19.
Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.
However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.
Denial of Access Extension (non-damage)
Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property. This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.
If covered by this clause, there are often very subtle differences in wording in your policy. This could depend on the insurer or policy. You may well be covered, but it will depend on your particular circumstances, and the specific policy wording.
It’s clear that the Government needs to do more in ensuring there is clear messaging for businesses, and to help the insurance market look after policy holders. This is an unprecedented situation, and with many people looking to claim on their insurance, we’re already seeing major delays which could have a domino impact.
People throughout the world are understandably facing all kinds of worries because of the current pandemic. Our ways of living have changed, and many business owners will not have experienced a situation like this in their life times. If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.
These claims are not simple, but loss assessors will be experts in business interruption insurance, and will specialise in large and complex claims. They will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.
HERE’S HOW YOU CAN LEARN TO TRADE RISK-FREE DURING THE COVID-19 MARKET CRASH
Trading app BullBear has launched new features to support budding investors looking to hone their skills against the backdrop of the COVID-19 stock market plunge. The risk-free financial game aims to empower the next generation of investors to learn how to trade stocks and shares by playing with dummy chips as opposed to real money. The app updates come as investors pull back from a volatile stock market rocked by the coronavirus outbreak.
At a time when some fresher investors are experiencing their first-ever stock market crash and seasoned investors are reluctant to invest new capital in the market, BullBear is empowering a whole new cohort of traders by teaching them how to trade effectively at no risk.
App users can engage in both short-term and long-term trading games using real-time market data from popular stocks enabling them to build investing confidence, making the app both engaging and educative.
With over 35,000 downloads, the app provides a free, fun way for thousands to learn how trading works by offering a practice arena in which trades take place and where no real money can be lost. Users can also enter into duals and competitions with other players. Whilst the app incorporates dummy chips to invest with, players can still redeem prizes by winning ‘bulls’ when they rank high in games. These bulls can be used to redeem rewards, such as gift cards from retailers like Amazon, Apple, Google Play and Netflix, at the in-app store.
Co-founder of the BullBear app, Anurag Saboo, stated
“I realised just how lacking the support for young investors was when my cofounder and I wanted to invest some money in stocks whilst at university. We had no idea where to start and so spent a couple of months trying to find a platform through which we could learn the basics before we risked any cash. But it simply didn’t exist. The resources that did were dull and theoretical. Paper trading can be very boring, and no-commission trading helps only if you make money out of your portfolio. Social methods of learning can help, for example, Etoro’s copy trades, but they still don’t let investors explore the markets themselves before putting money down. Combine this with the fact that only a small percentage of young investors make money through the market, and others end up staying away or are pushed away through losses, we decided to launch BullBear to offer a free, fun alternative.”
During a time of crisis accompanied by a turbulent stock market, the BullBear app provides a fail-proof way for budding investors to develop their trading knowledge, helping them to make more informed investments.
The BullBear app is available to download now on Google Play and the App Store.
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