Solution Properties
Solution ID:
200519194148733
Last Modified Date:
Mon Apr 13 11:10:25 UTC 2026
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
Process foreign income on the payroll
Description

Processing foreign income on the payroll requires employers to submit details of the employees local income and income earned working outside South Africa.

An important concept tied to foreign income reporting is the Foreign Employment Income Exemption under section 10(1)(o)(ii) of the Income Tax Act.

Up to R1.25 million per year of qualifying foreign employment income may be exempt from taxation.

The exemption applies only if the individual:

  • Is a South African tax resident
  • Works outside South Africa
  • More than 183 days outside SA during a 12‑month period
  • At least 60 days of the 183 days are continuous 

Any foreign employment income above R1.25 million is taxable in South Africa.

Visit to SARS website to read more.

Employers need to review and decide on how to process the income for their employees when outside South Africa.

When processing foreign income on the payroll, take note of the following:

  • The system design allows each tax record to contain either local or foreign IRP5 source codes, not both. An employee will therefore have multiple tax records when they work inside and outside South Africa
  • The system doesn't apply the Section 10(1)(o)(ii) exemption automatically. You'll need to create an exemption record. Once the employee's income exceeds the exemption limit, your need to create a taxable record

The following these guides to process foreign income on the payroll:

Employers must declare foreign service remuneration according to the SARS Business Requirements Specification for PAYE Employer Reconciliation or any related employer notices.
 
On assessment, SARS decides whether the exemption applies when it processes the employee’s ITR12 return. They'll base the decision on the ITR12 details and the IRP5 or IT3(a) certificate submitted by the employer.

CAUTION:

An employee’s potential eligibility for the exemption doesn't remove the employer’s duty to deduct and pay PAYE to SARS. If the employer believes the exemption will apply, they may choose not to deduct PAYE. In the case that SARS later disallows the exemption during ITR12 processing, the employer becomes liable for the unpaid PAYE, including penalties and interest.