If you’re a South African tax resident working outside the country — whether on a ship, in a specialised role abroad, or on secondment for your employer — you might qualify for a tax exemption on your foreign income.
South Africa’s Income Tax Act includes several provisions that provide relief from tax on income earned overseas, but each applies in very specific circumstances. These exemptions are not interchangeable, and the differences between them are important. Claiming the wrong exemption — or missing a key aspect of the exemption — can result in unexpected tax liabilities or compliance issues.
Below is a breakdown of the three key provisions in section 10(1)(o) of the Act, and when each one applies.
Section 10(1)(o)(i): Crew of a Ship (General Maritime Exemption)
This exemption applies to income earned by South African tax residents employed as crew members on ships engaged in international shipping.
Key Conditions
- The individual must be employed as a crew member on a ship.
- The ship must be engaged in one of the following activities:
- International transportation of passengers or goods for remuneration. This means the ship is involved in the international conveyance of passengers or cargo in exchange for compensation. This category covers a broad range of vessels, including cargo ships, merchant vessels, cruise ships, passenger liners, and yachts operating on international waters.
- Alternatively, the ship may be involved in prospecting, exploring, mining, or producing minerals from the seabed outside South Africa. However, this exemption applies only to those officers and crew members employed on such a vessel solely for the purpose of the ship’s passage.
- The employee must spend more than 183 full days outside South Africa during a 12-month period that begins or ends in the year of assessment (i.e., between 1 March and 28/29 February). A day excludes a travel day.
- The exemption applies to the full amount of income earned from services rendered on the ship outside South Africa. Importantly, the exemption is not limited only to the time physically spent outside South Africa.
- While the legislation does not explicitly require the individual to be an employee, SARS generally interprets the exemption as applying only to employees, excluding independent contractors. However, there is a reasonable argument that this exclusion may not be legally definitive.
Practical Implications
- This exemption is unlimited in amount, providing full tax relief.
- Crew members must maintain detailed records of time spent outside South Africa to meet the day-count requirement.
- We would recommend also including a seaman’s log showing ships worked on.
- Though you are not required to do 60 working days to qualify for this exemption we always recommend doing it because if you miss the 183 days in the tax year you then potentially have a fall back onto the general remuneration exemption.
Section 10(1)(o)(iA): Officers or Crew of a South African Ship
Section 10(1)(o)(iA) provides a full exemption from income tax for remuneration derived by South African tax residents who serve as officers or crew members on certain qualifying South African ships. This exemption is distinct from the general crew exemption under 10(1)(o)(i) and is subject to specific conditions regarding the nature of the ship and its operations.
Key Definitions and Criteria
- The exemption applies to remuneration derived by any person as an officer or crew member of a South African ship, as defined in section 12Q(1) of the Income Tax Act.
- The South African ship must be mainly engaged in one of the following activities:
- (aa) International shipping as defined in section 12Q(1), which refers to the transportation of passengers or goods by sea between South African ports and foreign ports or between foreign ports for compensation.
- (bb) Fishing activities conducted outside the Republic.
- International Shipping: Defined as the commercial operation of transporting passengers or cargo between ports in South Africa and foreign countries or between foreign countries.
- The ship’s principal activity during the relevant period must be either international shipping or fishing outside the Republic.
- The remuneration exemption under this section applies regardless of the number of days the employee spends outside South Africa during the year of assessment, differentiating it from the day-count requirements in other subsections.
Practical Implications and Compliance
- This exemption is full and unlimited in respect of income earned from services performed as an officer or crew member on qualifying South African ships.
- The exemption supports the South African shipping and fishing industries by providing tax relief to personnel serving on South African-flagged vessels engaged in international or offshore activities.
- To qualify, taxpayers must establish:
- Employment as an officer or crew member on a ship that meets the statutory definition.
- The ship’s registration under South African law.
- The nature of the ship’s activities, supported by operational logs, shipping manifests, or fishing licenses confirming engagement in international shipping or fishing outside South Africa.
- Unlike section 10(1)(o)(i), there is no requirement for the taxpayer to be outside South Africa for a minimum number of days; the exemption applies solely based on the ship’s registration and activity.
- SARS may request documentation to substantiate claims, including proof of employment, ship registration certificates, and operational activity records.
Section 10(1)(o)(ii): General Foreign Employment Income Exemption
Section 10(1)(o)(ii) is the most widely applicable and broad exemption available to South African tax residents who earn employment income outside the Republic. It was introduced to provide partial relief from South African income tax on foreign employment income.
Key Conditions
- The taxpayer must be a South African tax resident.
- The income must be remuneration from employment; this exemption does not extend to independent contractors or self-employed individuals.
- The exemption applies whether the employer is based in South Africa or offshore, its therefore not limited to only foreign employers.
- The taxpayer must spend:
- At least 183 full days outside South Africa within any 12-month period commencing or ending during the tax year, and
- At least one continuous period of 60 full days outside South Africa within that same period.
- The exemption amount is capped at R1.25 million of foreign employment income per tax year.
- Income in excess of R1.25 million is subject to normal South African tax rules, although DTAs or foreign tax credits may reduce double taxation risks.
- The exemption is only for employment income earned while outside of South Africa. If you are therefore earning $1 000 per month and work for 8 months outside of South Africa and 4 months in South Africa then $4000 would be taxable in South Africa.
Practical Implications
- Taxpayers should maintain comprehensive travel records, employment contracts, and employer declarations to substantiate claims.
- Travel records would include passport stamps but with the recent changes to passports not being manually stamped, flight tickets should be kept as evidence for the trip.
- If the income exceeds R1.25 million the taxpayer would pay that tax through the South African provisional tax system,
- The exemption appears to apply only where the taxpayer is required to work outside South Africa as a condition of their employment. SARS has interpreted this to mean that the time spent abroad must be a formal requirement of the employment contract or assignment. Individuals who choose to work remotely from outside South Africa at their own discretion — even if their employer allows it — may not qualify, as the foreign services were not rendered “in the course of employment” but rather “by choice.”
Comparison Table
| Section | Who It Covers | Key Activity | Test/Threshold | Limit |
| 10(1)(o)(i) | Crew of any ship | General international shipping | 183 days outside SA | Full exemption |
| 10(1)(o)(iA) | Officers/crew of SA-registered ships | (aa) International shipping or (bb) offshore fishing | Employment on qualifying SA ship | Full exemption |
| 10(1)(o)(ii) | Employees working abroad | Any services rendered abroad (general employment) | 183 days + 60 continuous days | R1.25 million cap |
Author: Michael Rushby
