SARS foreign travel subsistence allowance: What employers need to know

When employees travel abroad for business, paying a foreign subsistence allowance is a practical way to cover daily expenses. However, handling foreign subsistence allowances correctly under South African Revenue Service (SARS) regulations is essential to maintain tax compliance.

Key rules for foreign travel allowances:

1. Tax-free limits: SARS publishes an annual table specifying deemed daily subsistence allowance rates for almost every country. Allowances paid within these country-specific limits are tax-free and do not attract PAYE.
2. Meals & incidentals only: The deemed SARS rates cover meals and small incidental costs only. Accommodation and travel expenses must be paid or reimbursed separately based on actual receipts.
3. No receipts required for deemed rates: Employees do not need to provide detailed receipts for expenses spent within the daily SARS limit, provided the trip is genuine business travel outside South Africa.
4. Taxable excess: If an employer pays an daily amount exceeding the SARS limit for that destination, the excess portion must be treated as taxable income and subjected to PAYE payroll deductions.

Best practices for employers:

• Maintain travel logs: Keep proof of travel dates, flight details, and business objectives to justify the non-taxable allowance during SARS audits.
• Report correctly on payroll: Ensure non-taxable foreign allowances are reflected accurately on IRP5 certificates (IRP5 Code 3716 for non-taxable foreign subsistence).
• Check updated country rates: SARS updates country daily limits regularly—always apply the current rates for the applicable tax year.

Need assistance with payroll & tax compliance?

Managing international travel allowances and payroll tax compliance can be complex. At PRN Advisory & Tax Services, we help businesses structure tax-efficient payroll and maintain full compliance with SARS rules. Get in touch today.