South Africa's expat tax causing uncertainty and confusion South Africa's expat tax causing uncertainty and confusion

South Africa's expat tax causing uncertainty and confusion
28 Sep 2018

South African tax experts have warned that their clients are still extremely concerned about a new ‘expat tax’ despite the National Treasury adopting a softer stance on the matter.

Bari Duvenhage, personal tax specialist at Regan van Rooy, told delegates at the Tax Indaba conference: "I see a lot of panic coming our way."

She said expats were unsure about how the move would affect their tax burden, not least because many of them had no real understanding of the concept of tax residency.

"They [mistakenly] think if they are out of the country for 183 days, they are no longer tax resident and then this doesn’t apply to them," Duvenhage said.

In its February 2017 Budget, the Treasury proposed that a South African tax resident working abroad for more than 183 days a year, of which 60 days were continuous, would in future be taxed fully in South Africa. They would only be eligible for a tax credit for any tax paid offshore. 

But following a public backlash, the Treasury revised its proposal so that the first R1 million (US$69,018) of foreign remuneration would be tax-exempt in South Africa. The implementation of the amendment – previously scheduled for 1 March 2019 – was also postponed to 1 March 2020.

The upshot is that South Africans working abroad will only escape the tax change if they are not considered tax residents of South Africa or if they are deemed to be resident in a foreign country because of a double taxation agreement.

Arlette Manyi, tax risk manager at the FirstRand Group, told MoneyWeb that people had not anticipated the change coming as abruptly as it did and had hoped for more consultation.

But the new provision also does not make it clear whether an individual who left South Africa, went to another country, broke their tax residency due to the application of a tax treaty and paid their capital gains tax (CGT) exit charge but returned five years later, would be considered a resident.

Graeme Saggers, tax director at Nolands SA, said people who earned less than the R1 million threshold would probably break their tax residency but for chief executives and C-class executives the resultant CGT exit charge could be significant.

Tax experts have also expressed concern over the onerous process of claiming tax credits and warned that the change could deter companies from investing in South Africa due to the high employment costs incurred. But the South African Revenue Service has previously said it is unhappy with the extent of non-compliance among South African expats living abroad.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

South Africa draws up draft guidelines for taxing virtual currencies

Minding your manners in Africa

South Africans to be hit with tax increases this year

 

 

South African tax experts have warned that their clients are still extremely concerned about a new ‘expat tax’ despite the National Treasury adopting a softer stance on the matter.

Bari Duvenhage, personal tax specialist at Regan van Rooy, told delegates at the Tax Indaba conference: "I see a lot of panic coming our way."

She said expats were unsure about how the move would affect their tax burden, not least because many of them had no real understanding of the concept of tax residency.

"They [mistakenly] think if they are out of the country for 183 days, they are no longer tax resident and then this doesn’t apply to them," Duvenhage said.

In its February 2017 Budget, the Treasury proposed that a South African tax resident working abroad for more than 183 days a year, of which 60 days were continuous, would in future be taxed fully in South Africa. They would only be eligible for a tax credit for any tax paid offshore. 

But following a public backlash, the Treasury revised its proposal so that the first R1 million (US$69,018) of foreign remuneration would be tax-exempt in South Africa. The implementation of the amendment – previously scheduled for 1 March 2019 – was also postponed to 1 March 2020.

The upshot is that South Africans working abroad will only escape the tax change if they are not considered tax residents of South Africa or if they are deemed to be resident in a foreign country because of a double taxation agreement.

Arlette Manyi, tax risk manager at the FirstRand Group, told MoneyWeb that people had not anticipated the change coming as abruptly as it did and had hoped for more consultation.

But the new provision also does not make it clear whether an individual who left South Africa, went to another country, broke their tax residency due to the application of a tax treaty and paid their capital gains tax (CGT) exit charge but returned five years later, would be considered a resident.

Graeme Saggers, tax director at Nolands SA, said people who earned less than the R1 million threshold would probably break their tax residency but for chief executives and C-class executives the resultant CGT exit charge could be significant.

Tax experts have also expressed concern over the onerous process of claiming tax credits and warned that the change could deter companies from investing in South Africa due to the high employment costs incurred. But the South African Revenue Service has previously said it is unhappy with the extent of non-compliance among South African expats living abroad.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

South Africa draws up draft guidelines for taxing virtual currencies

Minding your manners in Africa

South Africans to be hit with tax increases this year

 

 

Leave a Reply

All blog comments are checked prior to publishing