Pilots: Remuneration not always taxable in South Africa

Pilots: Remuneration not always taxable in South Africa. Image credit: AdobeStock

Pilots: Remuneration not always taxable in South Africa

(Partner Content) Despite the substantial difficulties they have faced over the past year, South African pilots working abroad are still required to pay tax to the South African Revenue Service (SARS), unless there is a Double Taxation Agreement (DTA) in place that renders their income non-taxable.

Pilots: Remuneration not always taxable in South Africa

Pilots: Remuneration not always taxable in South Africa. Image credit: AdobeStock

Selected DTAs allow for the remuneration earned from rendering services as a pilot abroad to be taxable in the country where the company that operates the aircraft is a tax resident. 

Naomi Mudyiwa, Tax Associate and Cross-Border Tax Specialist at Tax Consulting SA, notes that this only applies to South African pilots and taxpayers exercising their employment aboard a ship or aircraft, who have not, or are not able to take steps to cease South African tax residency through financial emigration. This is usually because their intention is to return home at some stage.

“Pilots especially can benefit from DTAs because some of these treaties include an article that renders income earned from services as a pilot to be taxed in the country where the aircraft is operated or registered. Relief in terms of the article can be claimed, provided the aircraft is operated in international traffic, which specifically excludes locations solely within South Africa or the other country,” Mudyiwa said.

A DTA may save pilots from the potential cost of exit tax.

A major benefit of DTAs for pilots is that they will not be required to cease their tax residency to claim this relief from SARS.

“South Africans living abroad who cease their South African tax residency are usually liable for the deemed capital gains tax disposal, also known as an ‘exit tax’, upon ceasing tax residency. This can be a costly exercise if the taxpayer acquired a significant asset base before departing from South Africa,” she added.

However, by invoking the relevant article of the DTA, pilots do not have to worry about paying an exit tax as they can remain tax residents in South Africa without being liable to pay SARS income tax on their employment remuneration. The pilot’s income is simply rendered non-taxable in South Africa under the DTA.

The angle of approach for those in need of relief

Unfortunately, there is no one-size-fits-all solution and each case must be considered on its own merits. It’s also important to note that a DTA does not automatically apply and this relief must be properly claimed in one’s returns.

“When seeking to find out whether a DTA between South Africa and the jurisdiction of your airline’s aircraft operations will apply to provide relief in your circumstances, it is important to seek the advice of a tax law expert who can confirm eligibility, take the necessary steps to provide a proper finding and make the correct disclosures to SARS. Apart from saving time and helping you to file your returns correctly, the risk of SARS penalties and interest may also be mitigated if you seek professional assistance from an admitted attorney and a registered tax professional ahead of time,” she concluded.

If you are looking for advice on your South African tax affairs, please feel free to contact Dr Dylan Price at Tax Consulting South Africa via email on dylan@taxconsulting.co.za or call +27 11 467 0810. Tax Consulting SA is the largest independent tax practice in South Africa, visit www.taxconsulting.co.za for more information.