Significant changes in the pipeline - taxation of expats in South Africa
27 May 2019
Some South African tax residents working abroad, often referred to as "expats", are grumbling about changes to the Income Tax Act, 1962 (the Act) which comes into effect on 1 March 2020.
Expats who may have previously benefitted from not paying employees' tax in either South Africa or the foreign country where they worked, by virtue of the provisions of section 10(1)(o)(ii) of the Act (the exemption provision), may be required to pay employees' tax to SARS going forward.
As South Africa has a residence-based system of taxation, a person is considered to be a South African tax resident where that person is either ordinarily resident in South Africa or is deemed to be tax resident by complying with the threshold requirements of the physical presence test. Practically, a person can be regarded as being ordinarily resident in a place where they are settled and live with some degree of continuity, apart from temporary or accidental absences.
The exemption provision currently exempts from tax all foreign income earned by expats while working abroad where that expat: