SEAFARER TAX: PART ONE

As published in the files folder of the SAFFA Facebook group are the various SARS interpretation notes related to the SA tax act that governs how you are taxed on any forms of income made.

For now we will concentrate on remuneration in the form of salaries earned as an employee on a vessel. Note that the exemption articles cannot be used by independent contractors or business owners.

So what is relevant in determining your tax liability working at sea, be it on fishing vessels, exploration ships, luxury liners, yachts, tankers or container ships?

Firstly, what is your South African tax residency status with SARS?
Secondly, once you have determined if you are a resident or non-resident of South Africa in terms of the tax laws then the various article 10 exemptions come into play and there are 3 options to consider;

1.Section 10(1)(o)(i);
2.Section 10(1)(o)(iA);
3.Section 10(1)(o)(ii);

Last but not least there is also the impact of any Double Tax Agreements (DTA) between South Africa and any other country you may be residing in. This only becomes relevant if you do not normally return to South Africa after a stint on a vessel but have a “permanent residence” abroad.

What is ground zero of determining which taxes you are liable for on income earned?

Simple answer is, South Africa has a residence-based tax system, persons who are “resident” in the Republic are taxed on their worldwide income, subject to certain exclusions. Non-residents are taxed only on their income from a source within the Republic.

A natural person is a resident for income tax purposes if the natural person;

1. is ordinarily resident in the Republic; or
2. meets all the requirements of the physical presence test, and is not deemed to be exclusively a resident of another country for the purposes of the application of any tax treaty.

Sounds simple but, ordinary resident is a “minefield to navigate through and get safe passage to a non-resident tax status”.

Thus if your tax status with SARS is confirmed as “non Resident in terms of the South African tax act” you are sailing away stress free with no liability to pay tax on your hard earned money at sea.

Note: you still have to declare any income made or derived from profits made on investments in SA.

In Seafarers Tax: Part 2 we will dig into the Article 10 exemptions and DTA’s.

Source: Barry Pretorius – South African Tax Petition Group