Foreign Employment Income Exemption — Who Qualifies, What to Track, and Why It Matters

If you’re a South African tax resident earning a salary overseas, you may have heard that some or all of it might be exempt from South African tax. That’s only partly true. In this article, we’ll walk you through SARS’s rules around the section 10(1)(o)(ii) foreign employment income exemption, explain what changed in 2020, and show how crew working on ships (but not aircraft) may qualify for a full exemption under a different rule.

The Main Rule: Foreign Employment Income Exemption (Section 10(1)(o)(ii))

From 1 March 2020, South African tax residents working abroad are only partially exempt from tax on foreign employment income. The relevant section of the Income Tax Act is section 10(1)(o)(ii), and it allows a limited exemption – but only if all of the requirements below are met.

1. Who Can Claim It?

You may claim the exemption under section 10(1)(o)(ii) if:

• • You are a South African tax resident, and
  • You are an employee (not self-employed or a contractor), and
  • You earn remuneration (e.g. salary, leave pay, commission, allowances), and
  • You render those services outside South Africa, and
  • You meet both of the following time-based requirements in any 12-month period:
    

◦ You are physically outside SA for more than 183 full days, and

◦ At least 60 of those days must be continuous.

 Even one of these not met = no exemption.

2. What Portion of Income Is Exempt?

• • The maximum exempt amount is R1,250,000 per year of assessment.
  • Any income above that is taxed at normal rates.
  • If you earn income for both foreign and local services in the same period, the income must be apportioned. Only the portion earned abroad qualifies for exemption. 

  Example: If you work 200 days in total, and 120 were spent working abroad, then(120 ÷ 200) × total foreign income = exempt portion (capped at R1.25m)

3. What Proof Does SARS Require?

• • Signed employment contract showing your duties abroad
  • Travel schedule or calendar showing actual time spent outside SA
  • Passport entries or flight itineraries
  • Payslips or IRP5 showing foreign income (use source code 3652)
  • Calculation or schedule of exempt income SARS will not accept estimates. You need clear records of physical presence and employment.

What Changed in 2020?

Before 1 March 2020, all qualifying foreign income was fully exempt if you passed the time tests. But to limit double non-taxation (in zero-tax countries), SARS now caps the exemption at R1.25 million per year.

To offset potential double tax, you can claim a foreign tax credit under section 6quat, but only for the amount over R1.25m that is taxed in both countries.

Who Does Not Qualify?

Even if you meet the days test, you may still be excluded if:

• • You are a public office holder (e.g. diplomat, politician),
  • You are employed by a SA government department, municipality, or public entity, or
  • You are a contractor or self-employed — this only applies to employees.

Also note that services rendered in SA or rest periods taken inside SA do not count. But rest days spent abroad between shifts do count if you remained in continuous employment.

Special Full Exemption for Ship Crew (Section 10(1)(o)(i) & (iA))

Some individuals don’t have to worry about the R1.25 million cap at all. If you are employed as a crew member on a ship, a separate and far more generous exemption may apply under section 10(1)(o)(i) or (iA).

What Is the Ship Crew Exemption?

These two subsections offer a full exemption, with different requirements:

Supporting Documents Required for Seafarers

If you are applying under 10(1)(o)(i) or (iA), SARS may ask for:

• • Voyage logbook or schedule confirming sea days
  • Crew list or letter of employment from the shipping company
  • Ship registration documents (especially for 10(1)(o)(iA))
  • Proof of activities conducted on board
  • Passport and port stamps confirming international journeys
  • Detailed spreadsheet of time spent at sea versus on land This exemption is powerful—but it must be backed by proper documentation to succeed during SARS review.

What About Air Cabin Crew?

This exemption does not apply to airline pilots or cabin crew. Air crew must use the same section 10(1)(o)(ii) exemption as any other employee, and are subject to the R1.25 million cap, with day-counting and apportionment.

There is no provision in the Income Tax Act that treats air crew the same as ship crew, and SARS has not issued any Interpretation Note extending these exemptions to cabin crew.

What Should You Do If You Work Abroad?

Step 1: Identify Your Employment Type

• • Are you on a ship beyond SA waters? → Might qualify for full exemption
  • Are you a salaried employee abroad (land or air)? → Section 10(1)(o)(ii) applies

Step 2: Track Your Days Abroad

• • Count all calendar days abroad (not just workdays)
  • Ensure there’s at least 183 full days, and one stretch of 60 consecutive days

Step 3: Keep Proper Documentation

• • Signed employment agreement
  • Passport/travel records
  • Payslips & IRP5s (with correct source codes)
  • For ship crew: vessel registration, logbooks, crew list, sea-time record

Step 4: Calculate Exempt Amount

• • Apportion based on actual foreign workdays
  • Limit the exemption to R1,250,000 for section 10(1)(o)(ii) claims

Step 5: Submit to SARS

• • Declare foreign income in your return
  • Upload supporting documents if requested
  • Claim foreign tax credit (section 6quat) for excess income, if applicable

Need Help? We’re Ready to Assist

At On Q Accounting and Tax Services, we regularly assist clients who work abroad — including ship crew, oil rig workers, foreign contractors, and remote employees. We can assist with:

• • Confirming eligibility under the correct tax exemption
  • Preparing day-count and apportionment calculations
  • Drafting supporting documentation and travel logs
  • Completing and submitting your tax return to SARS
  • Claiming Section 6quat credits where applicable Get in touch with us to ensure your exemption is correctly calculated and fully supported.

Disclaimer: This article is intended for general information purposes only and does not constitute professional tax advice. For tailored guidance, please speak to a registered tax practitioner.