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Working overseas could become much less lucrative

If Treasury’s proposal to address double non-taxation is introduced.

JOHANNESBURG – A proposal to tax South African tax residents who work in countries with favourable tax jurisdictions like Dubai, Qatar and the Cayman Islands for more than 183 days a year and who currently don’t pay tax in these jurisdictions or in South Africa is fair and will bring South Africa in line with its peers, National Treasury says.

The proposal to amend the exemption on foreign employment income was mooted during the Budget, but has been met with criticism from some commentators who argue that it is unfair to expect individuals to pay tax in South Africa if they are absent from the country and don’t receive any local services.

Currently, if a South African tax resident works in a foreign country for more than 183 days a year, employment income earned in respect of those foreign services is exempt from tax in South Africa, subject to certain conditions. The exemption is available to employees of private-sector companies.

Treasury has proposed that the exemption be amended so that foreign employment income will only be exempt in South Africa if it is subject to tax in the foreign country.

Christopher Axelson, director for personal income taxes and saving at National Treasury, says it is trying to implement the residence-based principle of taxation in a more comprehensive manner.

A number of countries – for example the UK, Australia and Canada – tax residents that work overseas on their worldwide income. If they work in another jurisdiction where they are not taxed and there are no adjustments in terms of double tax agreements, the income has to be declared and tax paid in their home country.

“In our view we are an outlier in this area by not taxing individuals on their worldwide income and in effect we are just trying to align. We think it is not quite fair if there are individuals working and living in a global system where they are not actually paying tax anywhere,” Axelson says.

Working internationally for a year or two has been a popular way for many South Africans to pay off student debts, save for a property or supplement their retirement income. If the proposal is introduced, the financial benefits of such steps could be reduced substantially, depending on the tax jurisdiction and the double taxation agreement applicable.

Charles de Wet, Tax Partner at PwC, says the proposal would typically affect individuals who are seconded to an international company within the group and where no tax is paid in South Africa or the foreign jurisdiction.

The real problem with the current exemption, as perceived by Sars, is that some people have deliberately worked outside South Africa for 184 days a year in jurisdictions where no tax is payable and as a result their foreign salaries have been fully exempt from taxation, adds Tertius Troost, tax consultant at Mazars.

South Africans working in established jurisdictions like the US, England or Ireland, likely won’t be affected by the proposal because they will in any event be paying tax in these countries, De Wet says.

However, if the proposal finds its way into our law, a South African tax resident who works in Dubai and who earns more than R1.5 million per annum, may be taxed at a marginal rate of 45%, which would make the opportunity much less attractive financially.

De Wet says while the proposal is not unusual, the implementation thereof will not be as simple as it sounds. Double tax agreements will also have to be taken into account.

Ultimately, the proposal is unlikely to be a significant money-spinner for government if it is introduced, he says.

Since the proposal is still to be drafted into legislation for public input, Troost does not want to speculate about a potential implementation date, but says the most pressing issue is whether it will be applied retrospectively.

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First lets exclude them from work in SA with BEE and transformation, and then force them to not work in SA or overseas. Is this the innovative plans the government can come up with in boosting economic growth?

If they did it right from the beginning all those overseas workers would still be in SA and filing tax returns. They killed the cow that gave the milk.

unfortunately, I don’t think that the offshore employee has much choice here – if you’re SA tax resident, you pay… Only way around is to change passport, but as far as I know you will never get Qatari residency as a foreigner?

“A number of countries – for example.. Australia.. – tax residents that work overseas on their worldwide income” – RUBBISH. the test is residency. if one has moved from one tax domicile to another and severed all your “residential arrangements” in aus – then you are NO LONGER an aus resident and will only be liable for aus income as a non resident tax. this new way of getting more money to pay JZ and his apparatchik apparently includes people like me – which is rubbish as well.

Try reading the article, Robert, instead of just the headline. I really worry about the the inability of some to understand what is actually written.

Robert, for your much vaunted CA(SA) designation you are actually clueless about most things, including basic taxation – If you are a non resident the proposed change will not have any effect on you – SARS is looking to change this rule because of the abuse by SA residents – Essentially SA companies second senior staff to tax friendly countries and they end up paying no tax – Yet they are essentially still doing exactly the same job as before.

…………..and during their time ofshore they consume no SA resources and derive no benefits.

Why should they pay any SAtax during that time??

In such a situation I suspect a foreign passport will become substantially more attractive. For example, the ‘Portugal Golden Passport Program’. Bye from Abu Dhabi, Charles.

This is when tax morality plunges even more.
So easy to get around this new but desperate attempt by Treasury to get more money. Set up a company in one jurisdiction, which then acts as a labour broker for the individual in another country–where the work is done–and then push ALL expenses through this company, such as accommodation, car hire and others. End result–a bit more paper work but still no tax to the grabbers back in SA.
Oh, to be an international tax consultant in these days…..!

Just make sure your company is effectively managed from offshore and therefore tax resident offshore, otherwise you are dead in the water before you even start.

Leave the country. It is now controlled by amongst other things financial rapists.

It is a good idea! There are South Africans working on oil rigs/ships for 183 days in a year and they do one 60 day stint outside of South Africa. Yet their families live in South Africa and utilise the infrastructure on a daily basis like all other South Africans do. But we have to carry the can for them and their families. Plus what they earn outside South Africa they keep outside South Africa. Make them pay!

Maybe you would like to think about your comment. It is a tax on the earner, not the family in SA. They get taxed on income, pay VAT, rates, fuel tax, sin taxes, tolls etc etc. All from money earned by someone who got zero benefit from the “infrastructure” you witter about. It is a silly idea – probably not world practice and likely to result in external earners externalising their affairs (say to a company based in Mauritius and pay 15% tax) and hence a loss of foreign income for SA, which is not that far from Zim where such income is extremely valuable.

I thought about it and I came to exactly the same answer. In addition to the 45% income tax which I pay, my family also pay the “VAT, rates, fuel tax, sin taxes, tolls etc” you mentioned without any relief. Why should there be any distinction between me and Mr Oil Rig man? If he doesn’t want to live here he can emigrate, but if he is a South African resident for tax purposes he can pay his share like everyone else – finish and klaar! Additionally, your idea of routing the employment through a company in Mauritius is more fiction than reality and I have seen it fail time and again in practice. The reason, the directors fail to manage the company from offshore and it is regarded as a South African resident for tax purposes. All the real decision makers take their decisions in South Africa.


My personal view. Did my stint on oil and gas vessels working from Dubai, and NO govment don’t need that tax. Been forced from the SA labour market, had to left behind family, missed 2 years of kids growing up. And I don’t know what you did for me, you did not had to carry the can for me or my family, we paid our own school fees, medical aid, vat, and taxes.

Don’t tell me you always completely honest on your tax return, somehow exploring every loophole to gain that bit extra from SARS, the same outcome. We all complain about tax, and did we not pull out all the stops on Gordhan speech a month ago.

Believe me, been there , hats off to Mr Oil rig man, giving up the normal family live to support his kin back home, and not going on the SA welfare train. If govment not slaughtered the economy, and job sector believe me, most of them would still be in SA, and paying taxes.

I work like this not because i want to, but because i cant get a job in sa because i am white. The only insentive was the tax free,
I dont see my children and wife for most of the year. So yes it is easy to make opions when you sit at home. Believe me you dont carry my family. You carry the corupt goverment. I pay my dues.

Unfortunately for this is also not going to work to try and steel more money. I am immgrating and so will many more. So dont worry you will only carry the corupt goverment and it will get heavy my frien since although we did not pay tax we did bring money into the country. This is going to dissappear. Next year your tax will be higher. garentee. bi bi

A critical element will be whether it is only applied when there is NO tax payable in the jurisdiction outside of SA or whether the difference between what one is paying in the foreign jurisdiction and what one would pay in SA is applicable. According to commentary from Treasury after the budget that point is still being discussed between Treasury and SARS. If that applies there could be nasty surprises for SA expats all over the world.
One of the challenges is that a lot of low tax jurisdictions are also high cost – for example consider the cost of school fees in Dubai. It would become unaffordable for many South Africans to work there on the salaries available if they had to also pay SA tax. Similarly oil rig worker wages are set with the expectation that workers aren’t taxed – if they are that would eliminate the value proposition of that sort of work for South Africans – they would be priced out of the market by workers from other countries without such tax legislation.
I don’t see how the Portuguese Golden Passport/Visa program would help anyone in this case – it offers residency NOT citizenship. One still needs to be a citizen somewhere and that would have to be SA.

I believe, could be wrong, that the Portuguese program offers citizenship after a few years. That’s the course of action I would follow if forced to pay RSA taxes.

Maybe have a closer look at the economy in Portugal before you decide to go that route – Their future in the EU is not a given…

I am no tax expert but it seems unfair that the guy earning R600k pa supporting a family in Durbs should pay tax while the guy working on an oil rig earning R1.5m pa should not. Especially when we consider that they are neighbours, their kids go to the same school etc

One needs to understand the basis of tax in SA. This will mostly affect those who work temporarily offshore and have their families, etc in SA.

Those who have been living abroad for extended periods and working abroad will not be affected if they can show they are not ‘ordinarily resident’ in SA.

If you are not ordinarily resident in SA and don’t spend enough time in SA in terms of the time based rules this tax will not affect you.

The fact that you can’t get permanent residence in a country such as the UAE is irrelevant – it’s whether your intention is to stay abroad that counts.

If you do fall within this bracket then, dependent on your assets in SA, it may be a good idea to formally emigrate – that would make your intention pretty clear and wrap up any issues with SARS, etc.

What you would need to consider is what you do once you have feathered your retirement nest – that’s where programs such as the Portuguese NHR become useful and wouldn’t require the investment as per the Golden Visa programme.

It is understandable that Zuma needs a bit more money but to try and collect this from mainly “previous advantaged” people who were forced to leave South Africa due to being made redundant is far fetched. The families who lives in Dubai on a full time basis, this is the normal place where they stay is crazy. The cost of living in Dubai, although being marketed as tax free is very high. School fees is in the region of at least R200 000 per child per year while a 2 bedroom apartment will cost you at least R275 000 per year. To now implement a tax on these people will make it unaffordable to live in the Middle East and they will return to SA only to be unemployed and claiming benefits from the government and putting more people on the street. What will that achieve?

The facts in the article is also totally incorrect. Nobody from the countries mentioned in the article is taxed on world wide income. The have a similar 183 day rule. Currently only the Americans are and hence the ratio of Brits compared to Americans should be at least 5 to 1 if you exclude the military

The South African law system is based on English law and hence by implementing tax on people who lives permanently in Dubai is diverging from the English system, certainly not bringing it in line.

” … they are absent from the country and don’t receive any local services”

I live in the country and don’t receive any local services from my income tax money.

I fund others’ education, health care, age grants, nepotism & corruption, etc.

How is their position any different?

End of comments.





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