Uncertainty over implications of ‘expat tax’
Dubbed the “expat tax”, the amendments require South African tax residents working abroad will be subject to local tax on their foreign earnings, with the first R1 million exempt.
William Louw, professional tax practitioner with Sable International, says expats need to check their tax status, as the amendment specifically applies to South African tax residents - in simple terms, people working abroad, but who, in other respects, are still based in South Africa.
“The amendments have serious implications. The SA Revenue Service (Sars) considers your total remuneration, not just your salary, which means South African tax residents working in certain foreign countries and receiving additional benefits, such as accommodation and transport, could be taxed on the total value of the package.”
South Africa holds double-taxation agreements (DTAs) with various countries to ensure that a taxpayer is not taxed by both South Africa and the country in which he or she is working. “Where a taxpayer is registered as tax resident in both countries and there is a DTA in place, then the DTA will determine where and how a taxpayer must pay tax on income received,” says Louw.
“The people who are going to be most affected by the legislation are people in the Middle East or in countries where there is no DTA.
“Some countries in the Middle East have DTAs with South Africa, but the problem is that a lot of them don’t have a tax revenue office, which means you cannot get a tax resident certificate to prove to Sars that you’re a tax resident there.
“Dubai is one of the countries where you can get a tax residency certificate, but it’s expensive. Whether you work in a country with or without a DTA, you still need to know what your correct tax status with Sars is,” Louw says.
“If your tax status is incorrect at Sars, you need to make the change before the end of February 2021.
“The law comes into effect from March 1, 2020, but you still have several months to backdate your information and submit your return before the end of the tax year, otherwise Sars will come after you.
“The key thing is to be proactive: know your tax status, what you could be liable for, and sort out your issues with Sars.”