JOHANNESBURG – With so many people working and earning income abroad the subject of taxation has increasingly become a minefield. When South Africa’s cash-strapped National Treasury announced in 2017 that it intended to end the 2001 tax exemption that applies to foreign earnings, South African tax residents working abroad clamoured for relief.
The outcry led government to retain the exemption in its 2001 format, but with a crucial amendment. From 1 March 2020, exemption of tax on foreign earnings is limited to the first R1 million of such income, with the balance being subject to normal tax rates of up to 45 percent. The R1m threshold includes allowances and fringe benefits paid to expats not considered as earnings, such as housing, security and flights.
In addition, the exemption only applies to South African tax residents who are employed outside the country for more than 183 days in any 12-month period and for a continuous 60-day period during that time.
The provisions of the legislation do not apply to employees of national, provincial or local governments; nor to employees of certain public entities.
South African expats to whom this may apply need to establish the potential tax liability on their foreign earnings to ensure that their current and past income tax disclosures are correct; and to confirm that all tax obligations and specifically any exit taxes that may be applicable, have been settled, while making sure that overall tax compliance is complete, should they be taxed on foreign earnings.