What are the tax consequences for a non-resident individual working in South Africa for a resident SA company?

A non-resident is a person who 

  • Does not ordinarily reside in South Africa and
  • does not meet any one of the following requirements:
  1. 91 days in aggregate during the year of assessment under consideration;
  2. 91 days in aggregate during each of the five years of assessment preceding the year of assessment under consideration, and
  3. 915 days in aggregate during those five preceding years of assessment.

It is further noted that a non-resident is a person deemed to be exclusively a resident of another country for the purposes of the application of any agreement entered into between the government of South Africa and that of the other country for the avoidance of double taxation.
In order to determine the taxable income of a non-resident, the definition of `gross income’ in section 1 of the Income Tax Act is relevant.  It reads as follows:
`Gross income’ in relation to any year or period of assessment, means

  1. In the case of any resident…………………………
  2. In the case of any other person other than a resident, the total amount, in cash or otherwise, received by or accrued to in favour of such person from a source within the republic

During such year or period of assessment, excluding receipts or accrual of a capital nature…………………
Individuals are taxed on the basis of the application of the definitions contained in Section 1 of the Income Tax Act. The calculation are based
Gross income less exempt income = income.
Income less deductions plus taxable allowances and taxable portion of capital gains = taxable income tax.
Non-residents individuals (are residents of another country) are taxed only on income which is sourced or deemed to be sourced in South Africa. By `source’ is meant the originating place of  the income which once determined, must be located geographically. Internationally, the source of income for services or income from employment can is the place where the services are performed, irrespective of the place where the contract is entered into, where the employer is based or where the remuneration is paid. South African legislation and case law support this principle. South African courts have held that the originating cause of such income is the services or the work, and the location of such sources is the place where the services are rendered or where the work is done.
 In other words, a foreign employee working in South Africa is liable for normal tax under domestic law in respect of his or her employment income earned in South Africa. As a result, foreign person working in South Africa, gross income will include only income from a South African source. Remuneration and fees will be taxed in South Africa if the services are rendered in South Africa.
In conclusion, all persons who are non-residents are subject to tax in South Africa on their income from a source within or deemed to be within South Africa.

Submit