FAQ – Limits of tax on a subsistence allowance

 

A taxpayer, who earns US dollars for work done in Africa, wants to know about the South African tax implications. He writes:

If I am an expert and work in Africa for USD, do I get a rebate on my tax?

According to some information I received, you are cleared for tax on $199 per day if you are on rotation for more than eight weeks.

Graham Patrick, a Fisa member and fiduciary specialist at Nedbank Private Wealth, responds
:

Due to your reference to being “cleared for tax US$199 per day”, I suspect you have been receiving advice about a subsistence allowance.

A subsistence allowance is an allowance given to an employee for expenses incurred (or to be incurred) in respect of personal subsistence and related costs (such as drinks).

Where the allowance is in respect of activities outside of South Africa (such as your circumstances where you are working in Africa), the South African Revenue Service (Sars) publishes a table which determines the deemed daily allowance, which varies from country to country.

For example, the allowance for Kenya is currently $116 whereas the allowance for Nigeria is currently $121.

However, it should be mentioned that the nature of this allowance is frequently misunderstood.

Sars, in its Interpretation Note 14, details that the subsistence allowance is meant for exceptional circumstances. It cannot form part of an employee’s normal pay.

Whilst you need to spend at least one night away from your usual place of residence, the period cannot exceed six weeks spent outside South Africa.

Fin24

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