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Treasury set to tighten tax noose on expat workers

Aug 15 2017 14:02
Liesl Peyper

Cape Town – There are clearly many South African tax residents who earn money abroad and are not declaring that income to the South African Revenue Service (SARS), National Treasury said on Tuesday.

In a presentation given to Parliament’s standing committee on finance, Treasury elaborated on its proposal to repeal an exemption that creates the opportunity for South Africans who work abroad to not pay tax at all.

Since 2001 South Africa has extended coverage of the Double Tax Agreements (DTAs), which assigns taxing rights to “source” and “residence” jurisdictions and eliminates double taxation.

This means that South Africans who work overseas for a period of longer than 183 days pay tax in the country where they are working and are exempted from paying tax in South Africa, said Chris Axelson, director of personal income taxes and saving at National Treasury.

However, this exemption creates the opportunity for double non-taxation where no or very little tax is applied in the foreign country and National Treasury intends on repealing this section in the Taxation Laws Amendment Bill.

“We’re going to monitor this, as we’ve found that South African tax residents go overseas and it leads to double non-taxation – especially in countries where there isn’t any income tax,” Axelson said. 

This will mean that all South African tax residents will be subject to tax on foreign employment income earned for services rendered outside of the country, with relief from foreign taxes paid on the income under section 6quat (the claiming of foreign taxes paid or proved to be payable by a taxpayer as a deduction from a taxpayer's South African tax liability) of the Taxation Laws Act.

Axelson pointed out that tax credits will still apply, in other words an individual will still be given credit for the taxes paid overseas, which will prevent double taxation.

Individuals who have permanently left South Africa and who are no longer South African tax residents will not be affected by the new provisions.

national treasury  |  tax  |  expats
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