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Deduct home office expenses with split income streams and no IRP5

Posted 5 October 2015 under Tax Questions



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Worker says:
2 October 2015 at 11:48

I work from home - part time as a contractor for a US-based company, and part time for a South African private company of which I'm one of the shareholders / directors. I earn a regular monthly salary from the foreign corporation, but they don't issue an IRP5. I also bill my local company for my time, but irregularly, and often this income is put into a director's loan account rather than paid out in cash. The local company did not issue me an IRP5 for 2014. How do I declare my income in such a way that I can deduct the costs of running my home office?

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TaxTimTaxTim says:
2 October 2015 at 12:42

You would need to complete the foreign income section of the tax return and include the net amount - so the income earned less all the expenses which would include the home office. Remember to keep accurate records of all of this for tax purposes in case SARS asks for proof. The local income - does the company deduct PAYE?


Worker says:
2 October 2015 at 12:50

Thanks. The company did not deduct PAYE for local income. Does it make a difference that I'm a director of the company at all?


TaxTimTaxTim says:
2 October 2015 at 12:53

The company should be deducting PAYE and be registered as an employee. It won't make a difference that you are a director, but you would need to include this income under the LOCAL BUSINESS income section of the tax return.


Worker says:
2 October 2015 at 14:49

So I need to declare nett foreign income under its own section and then local income under the Local Business section. It seems TaxTim's / SARS' local business section is very much more detailed - would it make sense to declare all my home office expenses there (set off against the local income) instead of under foreign income (which really has no detail) or does this make no difference?


TaxTimTaxTim says:
5 October 2015 at 10:28

You should split this between the two income streams that they are attributable to. You can use the ratio of income to do this as an apportionment basis.


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