Quick Facts

• First R1.25 million of foreign income is tax-free
• Must work outside SA for 183 days per year
• Need 60 continuous days outside SA
• Only for employees, not self-employed
• Must still declare all foreign income to SARS

What Is the Foreign Employment Income Exemption?

Are you a South African working abroad? You might worry about paying tax twice. Once in the country where you work. And again in South Africa. This is called double taxation.

The good news is SARS has a tax break for you. It is called the foreign employment income exemption. This is Section 10(1)(o)(ii) of the Income Tax Act.

Here is how it works. South Africa uses a residence-based tax system. This means if you are a South African tax resident, you pay tax on all your income. This includes money you earn abroad.

But the exemption helps you. If you meet certain rules, the first R1.25 million you earn abroad is tax-free in South Africa. This applies every tax year (1 March to 28 February).

✅ Who Qualifies for This Exemption?

You must meet all these requirements to use this exemption:

You Must Be a Tax Resident

You must be a South African tax resident. This means either:

• You are ordinarily resident in South Africa (this is your home base)
• You meet the physical presence test (more than 91 days in SA per year)

You Must Be an Employee

You must work for an employer. This can be a South African or foreign employer. You must have an employment contract. The income must be remuneration (salary, wages, bonuses).

You Must Work Outside South Africa

You must physically render services outside South Africa. This means you must do the actual work in another country.

You Must Meet the Days Requirement

You must spend enough time outside South Africa. We explain this in detail below.

The R1.25 Million Cap (As of 2025)

Since 1 March 2020, there is a limit on this exemption. Only the first R1.25 million of your foreign employment income is tax-free each tax year.

What Happens If You Earn More?

Any amount over R1.25 million is taxable in South Africa. You pay normal income tax on this amount. SARS will use the standard tax tables for individuals.

How the Cap Is Applied

The R1.25 million cap applies on a cumulative basis during the tax year. Once you reach R1.25 million, all additional income is taxable. You cannot spread the exemption or average it out.

⚠️ The 183/60 Days Rule Explained

This is the most important part of the exemption. You must meet both these requirements:

Requirement 1: 183 Days Total

You must spend more than 183 full days outside South Africa. These are calendar days. They do not need to be consecutive. They must fall within any 12-month period.

Requirement 2: 60 Continuous Days

At least 60 of those days must be continuous. This means 60 days in a row outside South Africa. This must happen within the same 12-month period.

What Counts as a “Full Day”?

A full day means you are outside South Africa for the entire 24-hour period. If you leave South Africa at 11pm, that day does not count. If you return to South Africa at 1am, that day does not count.

The 12-Month Period

The 12-month period can start or end at any time. It does not need to match the tax year (1 March to 28 February). You can have a qualifying period that starts in June and ends the following May.

How to Calculate Your Exemption

If you work only outside South Africa, all your foreign remuneration up to R1.25 million is exempt. Simple.

But what if you work both inside and outside South Africa? Then you must apportion your income.

The Apportionment Formula

SARS uses this formula:

What Counts as Work Days?

Work days are days where you actually render services. This excludes:

• Weekends
• Public holidays
• Annual leave
• Sick leave

✅ Avoiding Double Tax: Section 6quat Foreign Tax Credit

What if you earn more than R1.25 million? The amount above R1.25 million is taxable in South Africa. But you might also pay tax in the country where you work. This creates double taxation.

How Section 6quat Helps You

Section 6quat allows you to claim a tax credit. This is for foreign taxes you already paid. You deduct this from your South African tax liability. This prevents double taxation.

Requirements for the Tax Credit

You can claim this credit if:

• The income is from a foreign source
• You included it in your South African taxable income
• You paid or proved you must pay foreign tax on it
• You have no right to recover the foreign tax

How Much Credit Can You Claim?

The credit is limited. SARS uses a complex formula. Generally, you can claim the lesser of:

• The actual foreign tax you paid, or
• The South African tax on that foreign income

Excess Credits

If your foreign tax is more than your SA tax, you can carry forward the excess. You have seven years to use it against future South African tax.

🚨 Who Cannot Use This Exemption

Not everyone can claim this exemption. You cannot use it if you are:

1. Self-Employed or Independent Contractor

This exemption is only for employees. If you are a freelancer, consultant, or run your own business, you cannot claim it. This is because your income is not remuneration. It is business income.

2. Government Employee

If you work for the South African government, you cannot claim this exemption. This includes:

• National government departments
• Provincial government
• Local municipalities
• Constitutional institutions
• Public entities (like state-owned companies)

3. Public Office Holder

If you hold a public office appointed under an Act of Parliament, you cannot claim this exemption.

4. Non-Residents

This exemption is only for South African tax residents. If you are a non-resident, you do not need this exemption. Non-residents only pay tax on South African-source income.

How to Claim the Exemption

You must claim this exemption on your annual tax return. It does not apply automatically. Here is the process:

Step 1: File Your ITR12 Tax Return

You must submit an ITR12 individual tax return. The deadline for the 2025 tax season is usually October or November 2025. Check SARS eFiling for exact dates.

Step 2: Complete the Foreign Income Section

On your ITR12, there is a section for foreign employment income. You must provide:

• Country where you worked
• Total foreign income earned
• Amount you are claiming as exempt
• Details of foreign taxes paid (if any)
• Your travel dates showing days outside SA

Step 3: Check Your IRP5 Certificate

Your employer must use the correct source codes on your IRP5. There are special codes for foreign employment income. The codes are:

• Code 3651: Gross salary earned outside South Africa
• Separate codes for exempt vs taxable portions

If your employer used wrong codes, ask them to reissue the IRP5. SARS will reject your claim if the codes are wrong.

Step 4: Tax Directives (Optional)

Your employer can apply for a tax directive from SARS. This allows your employer to reduce PAYE withholding monthly. This is especially useful if you earn over R1.25 million and pay tax abroad.

The directive takes Section 6quat credits into account. This means less tax withheld each month. But you still must submit an annual return to claim the actual Section 6quat credit.

⚠️ Documents You Must Keep

SARS requires comprehensive proof to grant this exemption. You must keep these documents:

Employment Documents

• Employment contract (showing foreign assignment)
• Letter of secondment or transfer
• Job description showing services rendered abroad

Travel Records

• Passport with entry and exit stamps
• Flight tickets and boarding passes
• Detailed travel log (dates in and out of SA)
• Schedule showing qualifying periods

Financial Records

• Foreign payslips
• Bank statements showing foreign salary deposits
• IRP5 or IT3(a) certificates
• Foreign tax certificates (if you paid tax abroad)

Work Logs

• Calendar showing work days vs rest days
• Timesheet or attendance records
• Project documentation showing where work was done

How Long to Keep Records

Keep all documents for at least five years. SARS can audit your return within this period. If you cannot prove your claim, SARS will disallow it. You will owe back taxes plus interest.

🚨 Common Mistakes to Avoid

Many South Africans working abroad make these mistakes. Learn from them:

Mistake 1: Not Declaring Foreign Income

Some people think they do not need to declare foreign income. This is wrong. You must declare all foreign income on your tax return. Even if it is exempt.

Not declaring can lead to penalties. SARS has access to international banking information. They will find out.

Mistake 2: Miscounting Days

Many people count partial days. Remember, a full day means 24 hours outside South Africa. If you leave at 11pm, that day does not count. If you return at 6am, that day does not count.

Keep accurate records. Use passport stamps to verify. SARS is strict about this.

Mistake 3: Wrong IRP5 Source Codes

If your employer uses regular South African source codes, SARS will reject your exemption claim. Make sure your employer uses the correct foreign income codes. Get your IRP5 corrected before submitting your tax return.

Mistake 4: Assuming Exemption for Self-Employment

Independent contractors and freelancers cannot claim this exemption. If you are self-employed, all your foreign income is taxable in South Africa. There is no R1.25 million exemption for you.

Mistake 5: Not Claiming Section 6quat Credits

If you earn over R1.25 million and pay foreign tax, remember to claim Section 6quat credits. Many people forget this. You end up paying more tax than necessary.

Mistake 6: Thinking Financial Emigration = Tax Non-Residence

Financial emigration through SARB does not automatically change your tax status. It is only one factor SARS considers. You must prove you broke ordinary residence. Otherwise, you remain a tax resident.

Mistake 7: Missing Filing Deadlines

If you miss the tax filing deadline, you lose your chance to claim. File on time. Use the SARS eFiling system. The 2025 tax season usually closes in October or November 2025.

Understanding Your Tax Liability (2025 Tax Year)

For the 2025 tax year, if you earn over R1.25 million in foreign employment income, you pay tax on the excess according to normal South African tax tables.

2025 Individual Tax Rates (Example)

Taxable Income	Tax Rate
R0 – R237,100	18%
R237,101 – R370,500	26%
R370,501 – R512,800	31%
R512,801 – R673,000	36%
R673,001 – R857,900	39%
R857,901 and above	45%

Note: These are indicative rates. Check SARS website for exact 2025 tax tables.

✅ Important Contacts and Resources

SARS Contact Details

• SARS Contact Centre: 0800 00 7ars (7277)
• SARS eFiling: www.sarsefiling.co.za
• SARS Website: www.sars.gov.za

Important SARS Documents

• Interpretation Note 16: Foreign Employment Income Exemption
• SARS FAQ on Foreign Employment Income Exemption
• Guide to ITR12 Individual Tax Return
• Interpretation Note 18: Section 6quat Rebate

Filing Deadlines 2025

For the 2025 tax year (1 March 2024 to 28 February 2025):

• Auto-assessments: Start 7 July 2025
• Tax season opens: 21 July 2025
• Tax season closes: 20 October 2025
• Provisional taxpayers: Extended deadline (check SARS)

💡 Pro Tips for Success

1. Keep meticulous records: Track every day outside SA from day one
2. Get tax advice early: Before accepting overseas assignments
3. Check your IRP5: Verify foreign income source codes with your employer
4. File on time: Do not wait until the last minute
5. Consider a tax directive: If earning over R1.25 million, ask employer about this
6. Understand your tax residency: Know whether you are a resident or non-resident
7. Keep foreign tax certificates: You need them for Section 6quat claims
8. Plan your trips home: Frequent trips can affect your qualifying period

Real-Life Scenarios

The SARS foreign employment income exemption can save you significant tax. But you must follow the rules carefully. Here is what you should do:

• Start tracking your days outside SA immediately when you begin working abroad
• Keep all employment contracts, payslips, and travel documents organised
• Ensure your employer uses correct foreign income source codes on your IRP5
• Always declare all foreign income on your tax return, even if it is exempt
• If you earn over R1.25 million, understand Section 6quat and claim foreign tax credits
• Consider getting professional tax advice, especially for complex situations
• File your tax return on time to avoid penalties and preserve your claim
• If self-employed, seek alternative tax planning as this exemption does not apply to you

Remember: SARS is increasingly sophisticated in detecting foreign income. International information-sharing agreements mean they can see your foreign bank accounts. Do not try to hide foreign income. The penalties are severe.