Proposed Tax Laws Could Bring South Africans Abroad Home… Or Make Them Emigrate
The draft tax law amendments for 2017, which were published by National Treasury this week (on 19 July), have got many South Africans working abroad concerned about what the future holds for them. The amendments contain the much-anticipated details on tax treatment of South Africans who perform their employment abroad. The draft law published proposes […]
The draft tax law amendments for 2017, which were published by National Treasury this week (on 19 July), have got many South Africans working abroad concerned about what the future holds for them. The amendments contain the much-anticipated details on tax treatment of South Africans who perform their employment abroad.
The draft law published proposes a far harsher tax treatment, recommending that the exemption section 10(1)(o)(ii) be completely repealed.
Jerry Botha, Managing Partner of Tax Consulting, says: “This means foreign employment income will become fully taxable, and the only relief may be claimed is foreign taxes paid as a tax credit.
“For example, where the employee falls into the 45% tax bracket and pays 25% tax in the foreign country, the SARS will now collect the difference of 20%.”
The current tax law determines that South African tax residents abroad must disclose their world-wide income to SARS… and may then claim an exemption on their employment income physically earned outside South Africa.
Earlier this year, then Finance Minister Pravin Gordhan announced in his Budget Speech that changes to this section were on the horizon.
“The suggestion was made that the exemption should not apply where the employee is not being taxed in the foreign country,” says Jerry.
There are limited options for South Africans abroad, should this law take effect:
“One alternative would be to properly emigrate, in which case there is a deemed disposal capital gains tax event. SARS probably anticipates this likely move, as the 2016/17 tax return now has a specific disclosure hereon, which never previously existed,” says Jerry.
“Other taxpayers are looking at establishing tax treaty residency in another country, but this is not as simple as getting a tax residency certificate somewhere else. Anyone who has been through a SARS process hereon would know how complex this may become.
“We have seen some expatriates indicating that with full tax on international employment income, which is what is effectively proposed, coupled with the high costs of international work, coming home may be their only alternative…”
This law is proposed to take effect 01 March 2019 onwards, thus providing a grace period for expatriates to “get their house in order”.
The comment deadline is 18 August 2017… so expatriates and their advisors should act urgently in submitting their comments on this change to National Treasury. Send your comments to: Nombasa Langeni at: Nombasa.Langeni@treasury.gov.za and Adele Collins at acollins@sars.gov.za.
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READ: South Africans Abroad – your TAX queries answered by an EXPERT