Exempt or non-taxable income refers to certain types of income, which is not subject to income tax. There is a section in the tax return called ‘Amounts non-taxable’ for this type of income so even though it is exempt from tax, it should (bar a few exceptions) still be declared.
Our Helpdesk receives many questions from taxpayers who receive exempt income and are unsure if it should be declared in their tax return. Read below to see what’s been puzzling our taxpayers and maybe these will help you too.
1. I'm currently staying in South Africa. I receive income from foreigners, for hunting trips outside of South African borders. I'm usually out of the country for a week or two at a time. Is this income I'm earning taxable in South Africa?
If you're outside of South Africa for longer than 183 days of which 60 days of those are continuous then this income, for now, would be exempt from South African tax. Otherwise unfortunately you would be taxed on all your income around the world. Please read more on the foreign employment income exemption here and well as a blog here on the changes that are coming soon.
2. I received a small inheritance last year. The money was released from the guardians fund upon turning me 21. Do I declare this as an income? If so, how and where?
Yes, you do need to include your inheritance in your tax return even though it is not taxable. You can include it under the "amounts not considered taxable" section of the return.
3. My wife and I are Irish and UK citizens respectively, currently living in the UK and are interested in the feasibility of retiring to South Africa. Our method of retirement would be either on a temporary retirement visa or as a person of independent financial means. I only mention this in case it impacts on my question. My particular interest is to understand how my UK pension income would be taxed in SA.
My pension would be derived from a number of sources:
1. UK State pension
2. Company pension. All pension is derived from activities not associated with South Africa
3. Personal pension plan. All funds are not associated with South Africa
From my research it suggests that the above would have to be detailed in my SAR tax return but would not be taxed. I would be grateful if you could confirm or correct this statement.
That is correct yes, foreign pensions are not subject to tax in South Africa, but would need to be declared. You would only pay tax on any income actually earned in South Africa or if you become a tax resident, any other income earned worldwide, less any taxes already paid in that other country. Pension would still remain exempt.
4. I am earning disability income - I did not receive an IRP5. How would I know how much I owe SARS?
Your disability income itself is not taxable so you should not be owing SARS anything for that, however you will only know that with certainty that you owe SARS nothing if you contact SARS at 0800 007 277 and ask them to check the balance on your tax account.
5. I just got a job offer in Cape Town and am currently in Durban and the company is giving me a sign on bonus of R100K. What are the tax implications of a sign on bonus compared to receiving a relocation allowance instead of the bonus?
A relocation allowance should be exempt from tax only if you provide proof of actual relocation expenditure and the employer reimburses you for such expenditure. A sign on bonus should be subject to tax.
6. My spouse and I are divorced and he pays me maintenance for our two kids. Is this amount taxable and do I need to declare this amount on my tax return?
No this amount will be exempt from tax as it was already taxed in the hands of your spouse and is not seen as an income for you. There is no need to declare this amount on your tax return.
7. I received a substantial monetary gift from a relative to pay towards my studies. Will I need to pay tax on this donation and should I declare it in my tax return?
No, you won’t need to pay tax on this income – donations are tax-free in the hands of the recipient. You should however, declare it in the ‘amounts non-taxable’ section of your tax return. You can read more on donations tax in our blog here.