Frequently Asked Questions
Our specialists have compiled and answered some of the burning questions that our seafarer clients frequently ask. Please note that these answers are specific to the question posed and may differ from person to person depending on your exact circumstances. We encourage you to schedule a consultation to obtain more pertinent advice on your situation.
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- Why should I use a fixed term employment contract with Seafarers Global instead of just doing it myself?
- What if I get fired or quit my job?
- I was under the impression that working offshore was tax free?
- How will relevant International Revenue Authorities ever find out about my foreign earnings?
- I am South African working at sea for a few years now, but never paid tax nor thought of the consequences, what should I do?
Why should I use a fixed term employment contract with Seafarers Global instead of just doing it myself?
- It is trite law that you cannot employ yourself, therefore you need a legal person to be your employer.
- Where you are a high earner or have more complex requirements, it is possible to setup your own company. The law expressly recognises that you can be employed by a company of which you are the owner. This, however, comes with setup costs as well as monthly and annual compliance costs, which are significantly in excess of our employment solution.
- Also, your situation must then warrant the business case of the administration, compliance and responsibilities of having your own company. We can refer you to one of our group companies should you believe that your personal complexities demand your own company, so we are acutely aware of that our employment solution is not a one-size fits all.
- The only other alternative, i.e. ‘doing it yourself’, is being self-employed and this comes with certain advantages, but far greater risks.
- One of the key risks for South Africans working abroad is that self-employment or ‘independent contractor’ income is not part of the seafarer or 183-and-60 day tax exemption.
*Being employed in this way will not raise any non-compliances with MLC and will not affect your SEA in any way. Please ask us for more information on how this works
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What if I get fired or quit my job?
- You can either remain in our employment on an unpaid basis, or otherwise-
- Give notice of immediate termination.
- We do not contract you under any obligation to work a notice period, so you are free to change employment or take on the next opportunity without using our solution.
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I was under the impression that working offshore was tax free?
- This is an incorrect and dangerous assumption as tax laws and most importantly tax residency needs to be taken into consideration as this will govern your tax liabilities.
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How will relevant International Revenue Authorities ever find out about my foreign earnings?
- Jurisdictions that have agreed to and signed the recently implemented OECD’s “Common Reporting Standard” (CRS) are obligated to obtain pertinent financial information from their financial institutions and automatically exchange this with other jurisdictions on an annual basis.
- Put simply, if you are living in a jurisdiction that has to comply with CRS, then your financial information will be shared with the relevant Revenue Authority.
- Click here for a list of countries.
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I am South African working at sea for a few years now, but never paid tax nor thought of the consequences, what should I do? (The below answer also applies to SA Seafarers just starting out)
As a first step, it is important to determine if you are tax resident of South Africa, as laid out by the two tax residency tests:
Click here to download the Ordinarily resident test.
Click here to download the Physical presence test.
If you are determined to be tax resident of SA, you are obligated to declare your past and present foreign and local earnings made aboard the vessel and apply for exemption where possible (See Section 4.3).
It is important to note the two tax exemptions that can be applied on foreign employment income for those working on vessels. You can obtain tax relief on your foreign earnings if either exemption can be claimed:
Exemption 1: Section 10(1)(o)(i) of the Income Tax Act
“10(1) There shall be exempt from normal tax—
(o) any form of remuneration—
(i) as defined in paragraph 1 of the Fourth Schedule, derived by any person as an officer or crew member of a ship engaged—
(aa) in the international transportation for reward of passengers or goods; or
(bb) in the prospecting, exploration or mining (including surveys and other work of a similar nature) for, or production of, any minerals (including natural oils) from the seabed outside the Republic, where such officer or crew member is employed on board such ship solely for purposes of the “passage” of such ship, as defined in the Marine Traffic Act, 1981 (Act No. 2 of 1981), if such person was outside the Republic for a period or periods exceeding 183 full days in aggregate during the year of assessment.”
A quick look at the “section 10(1)(o)(i) exemption” requirements:
- Income received must be for foreign employment aboard the vessel;
- The vessel must be either carrying passengers/goods for reward;
- The taxpayer must be part of the safe passage or navigation of the vessel; and:
- The taxpayer must be outside of SA for more than 183 days for the year of assessment.
Exemption 2: Section 10(1)(o)(ii) of the Income Tax Act
“10(1) There shall be exempt from normal tax—
(o) any form of remuneration—
(ii) received by or accrued to any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C in respect of services rendered outside the Republic by that employee for or on behalf of any employer, if that employee was outside the Republic
(aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and
(bb) for a continuous period exceeding 60 full days during that period of 12 months,
and those services were rendered during that period or periods”
A quick look at the “section 10(1)(o)(ii) exemption” requirements:
- Income received must be derived through foreign employment.
- The taxpayer must be outside of SA for more than 183 days for the year of assessment.
- The taxpayer must be outside of SA for a continuous period exceeding 60 days for that year of assessment.
- Kindly note the exemptions has been amended to exempt only the first R1 million as of March 2020.
Should one not have any assets, in SA, nor be a tax resident, it will not be necessary to register for tax, however it will still be advisable to ensure your non-residency is formalised with the authorities. This is extremely important to mitigate risk with the amended expatriate tax law taking effect 1 March 2020.
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