SARS FOREIGN SUBSISTENCE TRAVEL

Category: 
Tax
Question: 

Regarding the SARS Subsistence allowance for foreign travle.SARS has published a "list of daily maximum amount per country which is deemed to be expended"1. What are the implacations of this list for the employees taxes?2. What are the implications of the list for the employers taxes?3. What are the implications on the employer if the employer pays an amount which is greater or lesser than the amounts in the list to employees for foreign subsistece travel?3. What are the implications on the employer if the employer pays an amount which is greater or lesser than the amounts in the list to employees for foreign subsistece travel?

Answer: 

 

Regarding the SARS Subsistence allowance for foreign travle.

SARS has published a "list of daily maximum amount per country which is deemed to be expended"

  1. What are the implacations of this list for the employees taxes? Employees’ tax must not be deducted from subsistence allowance.

-  The foreign subsistence allowance must be reflected in the IRP 5 using code 3715 in cases where the `deemed ‘amount are exceeded. The recipient has to prove to SARS the actual incidental expenses –the deduction is limited to the actual allowance provided by the employer.

The code 3716 should be used in cases where the deemed amounts are not exceeded and no proof will be required.
2. What are the implications of the list for the employers taxes? These allowances are given to recipients who are employees who incur expenses by reason of duties of employment. Therefore, the employer is eligible to deduct these expenses as company expenses in the Income statement.
3. What are the implications on the employer if the employer pays an amount which is greater or lesser than the amounts in the list to employees for foreign subsistece travel?

You are reminded that it is SARS discretion to determine whether the allowance to the recipient is for incidental cost and not in lieu of something else. It is important that you be conscious of this fact.

  If the amounts are greater than the amounts listed in the list, SARS should allow it as deductible company expenses and provided that the employee disclose the unspent amount of the allowance as taxable income. If the excess exceeds the amount stipulated in the list and such excess seems unreasonable (without a rational argument to support it), SARS would question the large size of the allowance.

Please bear in mind the following:

  • The amount laid down in respect of travelling abroad will apply to employees who are ordinarily resident of SA.
  • T allowance and the deemed amount will not apply where the employer has borne the expenses – an example is where the employer via the travel agent has paid for the cost of incidentals, meals and accommodation. The provision of `reimbursement allowance’ is this context will be viewed as `salary’ because the employer has already paid for the `incidental cost’ to the travel agent.
  • A Lexis Nexis publication stipulates that foreign subsistence cannot be paid for a period exceeding six weeks – I could not find a SARS guide confirming this period. I am however, sure that if the period spent out of the country is too long, SARS would question the veracity of the foreign allowance supplied to an employee/recipient.       
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