If you’re a South African who is part of a super yacht crew (or you’re thinking of joining one) and you’re under the impression that this is a tax-free job, you’d be sadly mistaken. You’re no pirate, and the laws of the land apply to South African yachties even when you’re out at sea. To avoid a nasty run-in with the South African Revenue Service (SARS) when you next dock at your home port, here’s what you need to know about the seafarers’ tax exemption and how it works.
Do yachties pay tax in South Africa?
If you’re considered a South African tax resident, you’re liable to pay tax. If you’re not registered with SARS, this does not relieve you of your tax obligation and it only compromises your tax standing. The fact that you earned your money while at sea does not relieve you of your tax obligation in South Africa, either.
In fact, as a South African yachtie, it is your duty to ensure that you sail on the right side of the law with the tax authority.
Are seafarers exempt from tax?
Since changes were made to the tax law in 2020, South African expats and seafarers (this includes yachties) have been brought back into SARS’ tax net. However, not all hope is lost, as there are three relevant tax exemptions that can be claimed as a seafarer, depending on your circumstances and your ability to meet the eligibility requirements of each.
Who qualifies for tax exemption in South Africa?
As a yachtie, if you are a South African tax resident and you have assets, a bank account or an income remaining in South Africa, registration with SARS is essential in order to make use of the available tax relief when you declare your worldwide income.
Think you can fly below the radar? If you have an international bank account, as well as a bank account back home, there are common reporting standards in place that SARS will use to spot your income and snap you up for failure to declare your income.
What are the income tax rules for seafarers and yachties?
Whether you’re working on a fishing vessel, luxury liner or yacht, there are a number of considerations that must be weighed up in determining and calculating tax liability.
The tax position of a sea-going employee is slightly more complicated than a regular employee earning a foreign income abroad. There are three possible exemptions in South African tax law, which leaves much room for uncertainty and misinterpretation.
The seafarers’ tax exemptions differ based on the type of vessel you are on, and the position you hold on that vessel.
|INCOME TAX ACT||Section 10(1)(o)(i)(aa)||Section 10(1)(o)(i)(bb)||Section 10(1)(o)(ii)|
|ALSO KNOWN AS||FIRST SEAFARER EXEMPTION||SECOND SEAFARER EXEMPTION||EXPAT EXEMPTION|
|APPLIES TO||Office or crew members aboard a vessel for foreign employment, including the international movement of passengers and goods for reward.||Individuals who are part of the crew or officers on a ship that is involved in mineral prospecting, exploration, or mining, or the production of minerals from the seabed beyond the borders of South Africa.||Individuals who earn employment income from foreign sources and fulfill the necessary criteria, as South African taxpayers.|
|ELIGIBILITY||Must meet employment requirements and the 183 days rule.||Individuals who are employed as seafarers exclusively for ensuring the secure navigation or safe passage of the vessel.||Must meet tax residency tests and the 183/60 days rule.|
|TYPE OF EXEMPTION||Full exemption from tax in South Africa on foreign employment income earned.||Full exemption from tax in South Africa on foreign employment income earned.||Capped at R1.25 mil, excess taxable at individual marginal tax rate in South Africa.|
What do South African yachties need to know about protecting their foreign income from tax?
As a yachtie, your starting point for tax relief should be Section 10(1)(o)(i)(aa). To take advantage of this seafarers tax exemption, you have to ensure that the yacht on which they are working is a charter yacht used for the purposes of transporting passengers or goods. If you do not meet the requirements of this section, you can still look to Section 10(1)(o)(ii) for tax relief, which is the general foreign income exemption available to all South African tax residents earning a foreign income abroad.
In order to qualify for this foreign income exemption, the following requirements must be met:
- There must be an employer-employee relationship (an employment contract)
- It is necessary to have received compensation for the services provided.
- The taxpayer must be outside of South Africa for a period / periods exceeding 183 days in total during any 12 month period, of which 60 full days must be continuous.
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