The world’s yachting management business is large and attracts staff from around the world. The South African contingent has been growing considerably of late, not least because it offers an opportunity to work with limited passport and visa issues.
The question arises though, as to how to optimize that opportunity financially. Very often crew are based on a mega yacht that travels around the Med, Caribbean and infrequent stops in the US. Often no tax is paid or deducted from salaries and crew live largely for free on board, so it is an opportunity to save. However, the fact that the yachting management company has not deducted tax, does not mean that it is not payable.
For years, South Africa has offered an exemption from tax in respect of South African residents who worked outside of South Africa for at least 183 days a year, including at least of one stint of 60 days. They would remain taxable in respect of any income earned in the other half of the year whilst in South Africa.
This exemption has proved invaluable to yachting crew as they would invariably be able to use the exemption as they often based year-round outside of South Africa. The exemption, however, would not necessarily apply in the first year when they would only be outside of South Africa for a part of the year.
The Minister of Finance recently announced that the exemption will be partially withdrawn as from 1 March 2020 in that the first R1m would be exempt from tax, with the balance taxable as normal. This would suit some but not all yachting crew.
It is also entirely possible that for those who have left South Africa to take up a permanent crewing position, that they can show that they are not ordinarily resident in South Africa, and hence not taxable there at all ie: they do not need to rely on the 183 day exemption at all. In these instances they do, however, need to ensure that they do not spend too much time in SA in terms of the days counting test even though they are ordinarily resident on board. Specific advice should be taken in this regard.
Other planning points to consider:
Life on board a mega-yacht also offers up some other possible planning points to consider.
If you happen to have a foreign passport perhaps you could use the opportunity to formally emigrate out of South Africa. This status can be very useful in that you can invest back into South Africa as a non-resident.
Also, in a wider family circumstance it can be useful to play that role for your family; Perhaps too you could receive a distribution from a South African or offshore trust during a time when you are no longer tax or exchange control, resident. Such a distribution may well be able to leave South Africa as you are non-resident;
Perhaps also use the opportunity to take out international medical aid and life cover which you should be able to retain on return to South Africa;