JOHANNESBURG: In this tax column, Piet Nel, head of the School of Applied Tax at the South African Institute of Tax Professionals (Sait), answers a reader’s questions about life insurance policies. For purposes of the medical scheme fees credit, the resident status of the individual is not relevant. What is relevant is who made the payment. The “tax benefit”, as you say will therefore not be lost when payment is effected from abroad.
For the rest of the guidance, we accept that the individual is a person who is deemed to be exclusively a resident of the RSA for purposes of the application of the agreement entered into between the governments of the RSA and Mauritius for the avoidance of double taxation.
As Mauritius gets a taxing right (see article 14 of the treaty) and the RSA also taxes the income, the individual would have to rely on exemption for relief of the double tax. The individual will qualify for the exemption in respect of the remuneration in respect of services rendered outside the RSA by that employee for or on behalf of any employer. The exemption is available under section 10(1)(o)(ii) of the Income Tax Act. It applies if the individual was outside the RSA for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and for a continuous period exceeding 60 full days during that period of 12 months, and those services were rendered during that period or periods.
If the exemption applies, no RSA normal tax would be payable. The medical scheme fees credit, would then not benefit the taxpayer, unless the individual has other sources of income in the RSA, the aggregate of which exceeds the tax threshold. In other words, if no tax is payable in the RSA, the rebate would not lead to a benefit (it can also not create a refund).
