How does the foreign employment income exemption work?
The foreign employment income exemption is a tax rule that allows South African tax residents working abroad to earn up to R1.25 million per year tax-free in South Africa.
Any foreign salary earned above this R1.25 million threshold is subject to standard South African income tax, even if the person has already paid tax in the foreign country where they work.
The 183-day and 60-day rule
To qualify for this exemption, known legally as Section 10(1)(o)(ii) of the Income Tax Act, an employee must meet strict physical presence tests regarding their time spent outside South Africa.
The primary requirement is that the employee must spend more than 183 full days outside South Africa during any 12-month period. At least 60 of those days must be completely continuous (unbroken).
If an employee returns to South Africa too frequently and breaks the 60-day continuous period, or falls short of the 183-day total, they lose the entire exemption. If that happens, 100% of their foreign income becomes taxable by the South African Revenue Service (SARS).
Employees only (no contractors)
The law specifies that this exemption applies strictly to employment income. This includes a standard salary, bonuses, overtime pay, and fringe benefits.
It does not apply to independent contractors, freelancers, or self-employed individuals running their own businesses abroad. Because independent contractors do not have a formal employer-employee relationship, their foreign earnings do not qualify for the R1.25 million exemption and are fully taxable in South Africa.
Declaring the income to SARS
A common mistake expats make is assuming that because they earn less than R1.25 million, they do not need to file a South African tax return.
South African tax residents are taxed on their worldwide income. This means all foreign earnings must still be formally declared to SARS on an annual tax return. The exemption is not applied automatically; the taxpayer must actively claim it when submitting their return so SARS can verify that the day-count requirements were met.
Double tax and foreign tax credits
If a person earns R2,000,000 abroad, the first R1,250,000 is exempt, leaving R750,000 subject to normal South African tax. However, the employee likely already paid income tax to the foreign government on that same R750,000.
To prevent people from being taxed twice on the same money, South African law provides double tax relief under Section 6quat. When the employee files their SARS return, they can submit proof of the foreign taxes they already paid. SARS then grants a foreign tax credit, which directly reduces or completely cancels out the South African tax owed on that remaining R750,000.
Sources
Reviewed July 2026