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In March of 2020, South Africa implemented a hard lockdown to help combat the spread of COVID-19. As there were many uncertainties regarding the length and severity of this lockdown at the time, many South African citizens who had been working abroad chose to return home. This influx in the return of South African citizens raised the serious question of the consequences the pandemic would have on the foreign employment income tax exemption.  
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This exemption is given based on the physical absence test, as identified in the Income Tax Act. This test details that, in order to qualify for the tax exemption, an individual that is working abroad and employed by either a local or foreign employer must be physically outside of the Republic of South Africa:

  • For a period exceeding 183 full days in aggregate during any continuous period of 12 months
  • For a continuous period exceeding 60 full days within that period of 12 months.
These regulations would have to be met in order to qualify for this tax exemption. In October 2020, the National Treasury acknowledged that this would not be possible for individuals working abroad, due to the various international travel bans that prevailed during the pandemic.

To combat this issue, the National Treasury proposed that changes were to be made to the details of this exemption so that the 66 days of hard lockdown, from the 27th of March till the 31st of May, would be subtracted from the total 183 days required for this exemption. Hence, making the regulation require that an individual must only spend 117 full days abroad in any 12 month period, for years of assessment ending between the 29th of February 2020 and the 28th of February 2021.

This was amended to alleviate individuals that may not have been able to qualify for this tax exemption due to the COVID-19 lockdown implementation.

At MMS Group we take a personalised approach to our tax consultancy services. If you require professional tax advisory assistance for yourself or your business, please feel free to get in touch with our team.