NO one enjoys paying taxes – There is no greater pain quite like seeing what you could have walked away with at the end of the month if the taxman hadn’t claimed his cut. If you happen to be an expat, you’re going to need to start paying closer attention to the tax law, and what that tax collector is after.
An amendment to the Income Tax Act that forms part of the Taxation Laws Amendment Bill of 2017 is of particular interest to you, despite the fact that ‘many South African expatriates are under the false impression that the law has not been formally amended and will thus not affect them’.
This change is coming, and soon.
The new tax law states: ‘There shall be exempt from normal tax any form of remuneration to the extent to which that remuneration does not exceed one million rands in respect of a year of assessment and is received by or accrues to any employee during any year of assessment by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument or allowance… in respect of services rendered outside the Republic by that employee for or on behalf of any employer, if that employee was outside the Republic.’
This new tax law will only come into effect on March 1, 2020 (tax year ending February 28, 2021) so you still have some time to get your affairs in order.
What are your options? Apparently, these are the three schools of thought:
- Some expatriates are starting to wrap up their offshore work and are planning to return to South Africa.
- Financial emigration. To do this, you must notify the South African Revenue Service (Sars) and the South African Reserve Bank that you are no longer ‘ordinarily resident’ in South Africa. This is the only formal route in law permanently to have a status change noted.
- A more cautious group of expatriates have adopted a ‘wait and see’ approach. There are groups petitioning to negotiate the R1m exemption.
Petition groups continue to engage with National Treasury attempting to have the rules relaxed further.
The most compliant way to ensure that foreign income earned as a South African expatriate is protected from South African tax is to formalise your emigration through Sars and the Reserve Bank. Once it has been completed, the tax ties with South Africa are cut cleanly with regard to foreign income.
One of the important items in last year’s parliamentary process was the forewarning about lastminute changes. It was noted that someone who has been an expatriate for a long period and who ‘emigrates’ just before March 1, 2020, must expect their action to be viewed with suspicion.
The prudent position is to be legally compliant and have your tax affairs fully up to date, which includes having your correct tax status noted on the SARS system.
For SARS to regard you as a low risk taxpayer, it must have a history of consistent compliance.
The third option seems like maybe the last hope that the National Treasury will be persuaded to bend the rules.
All we can do for now is wait and see.
Of course, the only people you should be listening to are the tax experts because this isn’t the kind of thing you want to leave for a rainy day.
Contact any one of Nexia SAB&T branches nationally for assistance in your tax affairs.
Please note that the above is for information purposes only and does not constitute tax advice. As each individual’s personal circumstances vary, we recommend they seek advice on the matter.
Please note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein. If you are in doubt about any information in this article or require any advice on the topical matter, please do not hesitate to contact any Nexia SAB&T office nationally.
Article prepared by: Aysha Osman
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