27 February 2017
By Lisa Griffiths, BDO Wealth Advisers, South Africa
South African residents employed overseas currently enjoy a tax dispensation in terms of Section 10 of the Income Tax Act. Provided that they are employed outside the country for 183 days (including an unbroken 60 day stretch), the income derived from this employment is not taxed in South Africa.
There are further conditions to this section, but provided that a person is bona fide working outside South Africa, their salary is unlikely to be taxed in South Africa. Of course, these salaries are not normally taxed at source either.
Despite the disruption to normal family life, this has made working abroad very attractive for many South Africans, especially with our stagnant jobs market. Maritime jobs are an obvious example, however virtually every profession and trade sees South Africans working outside of the Republic, with the Middle East being a popular destination for expat jobs. “Saffers” are found working in every far flung corner of the world.
In terms of this year’s Budget proposals, SARS is now considering taxing this income in South Africa, unless it has been taxed previously by another country. In the words of the Minister, the current exemption to foreign earnings ‘Appears excessively generous’.
This proposed change will have to be written into law and debated and passed through Parliament before it becomes a reality. Treasury have a fine record of not introducing retrospective legislation and therefore the earliest effective date would probably be 1st of March 2018.
Should this legislation be enacted, we would hope that that the implementation date would be at least 12 months thereafter in order to allow families sufficient time to decide whether the financial reward or working overseas continues to merit the sacrifices.
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